Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order? No, because additional production would exceed capacity. No, because incremental costs exceed incremental revenue. Yes, because incremental revenue exceeds incremental costs. Yes, because incremental costs exceed incremental revenues. No, because the incremental revenue is too low

    General guidance

    Concepts and reason

    Pertinent consume: It is individual of the indeterminate consume that is expedient to run occasion importation business sentences. The administration sentence can be rectified with the effect of pertinent consume. The consume which canreferable attributable attributable attributable attributable transmute the sentence of the administration in-reference-to the device or any consequence is referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable pertinent such as corrupt consume. Fundamentals

    Cost: It is an estimated quantity of expenses to be runred on consequence manufactured or employment supposing by the existence. The elements of consume are frequented consume and infrequented consume. Frequented consume is the consume frequentedly cognate to the fabrication of the consequence. It embraces the quantity of frequented material, quantity of frequented strive and quantity of frequented expenses runred on consequenceion.

    Ace Consumes: It is the totality of several types of consume cognate to a ace of a consequence or employment. Ace Consumes can be strong restraint a detail Job, Batch or a Consequence. It is calculated by dividing Total Consume of the stock executed and sold with Total units executed and sold restraint that detail Job, Batch or Consequence as the condition may be.

    Unroving consume: The consume and expenses which do referable attributable attributable attributable attributable transmute the raze of distillation. The expenses whose quantity and truth of the incident, twain are unroving. If the audience does referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable effect any output, quiescent the unroving expenses scarcity to be remunerated.

    Inconstant consume: The consume and expenses which transmute with the raze of distillation. The expenses which transmute with total extra ace executed. Further the audience effect, further accomplish be the inconstant consume.

    Residual appraise: It is the asset’s estimated appraise at the purpose of the determined estate of the asset. The residual appraise is estimated according to the performance of the asset during the limit and several other factors which swing the appraise of the asset such as technology, the ask-coercion restraint the part in the companionship, government policies and frequent other factors. Show short First Step | All Steps | Answer Merely

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    Administration should referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable repel the direct on advantage of joined consequenceion competency. Joined evolution does referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable yield the competency of the consequenceion stock.

    Management should referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable repel the direct on advantage of surplus incremental consume. Incremental consume is referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable further than incremental return.

    Administration should referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable sanction the direct on advantage of surplus incremental consume. Incremental consume is referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable further than incremental return.

    Administration should referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable repel the direct on advantage of inferior incremental return.Explanation | Hint restraint instant step

    The joined consequenceion competency is referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable further than competency of the evolution stock. Currently, Audience M effects at 75% competency. Aces executed at 75% competency is 7,500 aces. If the effectr effects at 100% competency then aces to be executed accomplish be as abandoned below:

    Unitsat100%capacity=UnitsproducedLevelofactivity=7,50075%=10,000units\begin{array}{c}\\{\rm{Units at 100\% competency}} = \frac{{{\rm{Units executed}}}}{{{\rm{Raze of activity}}}}\\\\ = \frac{{7,500}}{{75\% }}\\\\ = 10,000{\rm{units}}\\\end{array}Unitsat100%capacity=LevelofactivityUnitsproduced​=75%

    7,500​=10,000units​

    If the effectr scarcitys to effect joined aces, then 2,500 aces can be executed as aces at 100% competency is 10,000 aces and currently, reason effects 7,500 aces. Peculiar direct is to effect 1,500 aces which do referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable yield the competency of consequenceion.

    Incremental consume occasion evaluating peculiar direct is the merely inconstant consume of $3 per ace. It does referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable embrace unroving consume of $1.50 owing it is a corrupt consume which is to be runred irrespective of the sentence captured cognate to the peculiar direct.

    Peculiar direct accomplish be sanctioned by Audience M if profit can be generated through sanctionance of the peculiar direct. If the incremental consume accomplish yield incremental return, it accomplish upshot in a missing restraint the strengthening. The direct accomplish referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable be sanctioned on the plea of missing.

    Incremental return of peculiar direct is $5 per ace and normally Audience M sells at $6 per ace. Difference between the return is referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable as ample that it upshots in repelion of the peculiar direct. Incremental consume is referable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable attributable so cheap.