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WalesBusinessQuick questions
Business Analysis and Strategy (A2 Unit 3)
Quick questions on Special order decisions and contribution - WJEC A-Level Business
3short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What are relevant costs?Show answer
The relevant costs of a special order are the costs that change because of it - normally the variable costs of producing the extra units. Fixed costs are not relevant if they stay the same whether or not the order is accepted. But if the order requires extra capacity (overtime, new equipment, hiring), those additional costs become relevant and must be covered by the order's revenue too. With no spare capacity, accepting the order may also mean turning away full-price work (an opportunity cost).
What is q1?Show answer
Explain why fixed costs are usually ignored in a special order decision when there is spare capacity. [3 marks]
What is q2?Show answer
A special order of 300 units is offered at £12 each; variable cost is £8 per unit and there is spare capacity. Calculate the total contribution from the order. [2 marks]
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