ACTG2020_Week5 2014 Ch12CMD (1)

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Unformatted text preview: dwide. managerial accountants at Worldwide. Accept or Reject a Special Order (cont’d) Worldwide will save about $5,000 in reservation and ticketing costs if the charter is accepted. Accept or Reject a Special Order (cont’d) Since the charter will contribute to fixed costs and Since the charter will contribute to fixed costs and Worldwide has idle capacity, the company should Worldwide has idle capacity, the company should accept the flight. accept the flight. Accept or Reject a Special Order (cont’d) What if Worldwide had no excess capacity? If Worldwide adds the charter, it will have to cut its least profitable route that currently contributes $80,000 to fixed costs and profits. Should Worldwide still accept the charter? Accept or Reject a Special Order (cont’d) Worldwide has no excess capacity, so it should reject the special charter. 46 Accept or Reject a Special Order (cont’d) With excess capacity . . . Relevant costs will usually be the incremental costs associated with the special order. Without exc...
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