Special Order Decisions
Accepting One-Time Orders
A special order is a one-time customer request, usually at a reduced price. The decision depends on whether incremental revenue exceeds incremental costs and whether idle production capacity exists.
- Consider only additional revenues and costs.
- Accept if incremental profit is positive.
- Ensure regular customer prices are not negatively affected.
- Evaluate capacity constraints before accepting.
Tip
Idle capacity often makes special orders more attractive because fixed costs are already covered.
Summary
Special orders should be accepted only when they increase overall company profit without harming long-term business.