22. Outdoor Living Company has just received a special order for 500 hammocks. O

Question

22. Outdoor Living Company has just received a special order for 500 hammocks. Outdoor Living has sufficient idle capacity to accept the order. Accepting the order will increase Outdoor Living's total variable manufacturing costs. Which type of cost is considered relevant to Outdoor Living's decision of whether to accept or reject the special order?

a. Company president's salary

b. Salary of the production manager

c. Raw materials to make the 500 hammocks

d. Depreciation on equipment that would be used to make the hammocks

Explanation / Answer

c.Raw materials to make the 500 hammocks is correct option

because Fixed costs like Company president's salary,Salary of the production manager,Depreciation on equipment that would be used to make the hammocks are irrelevant for decision making because those are unavoidable costs.

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