US CMA Part 2 · Chapter 6 · Question 21 of 22
A company has substantial idle capacity and receives a one-time special order that will not affect regular sales or prices. In the short run, what is the minimum price per unit it should accept?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The incremental (variable) cost per unit of filling the order
Explanation
With idle capacity and no effect on regular business, any price above the incremental cost of the order increases short-run profit, because fixed costs are unchanged. The minimum acceptable price is therefore the incremental (usually variable) cost, plus any opportunity costs if they exist. Long-run pricing, by contrast, must cover all costs.
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