Sometimes, when a company has spare production capacity, it is willing to fulfill SPECIAL ORDERS for non-regular customers. Normally, the prices quoted are lower than those regular customers.

So when do a Company Accept or Reject a Special Order?

Generally, the rule is to accept the order as long as the incremental revenue is MORE […]

At times, management needs to decide whether to manufacture the product or to buy the ready made from other companies.

The following are some reasons to buy from other companies:

Flexibility to meet urgent demand of customers;
Overcome limiting factor problem ( Part 3);
Concentrate […]

As a result of limited supply of resources constraint, a company normally cannot produces as many products as it wish.
The limited supply of resources can be in many forms like limited cash, labor time, material/machine availability and others.
In line with the limited resources, the production manager therefore needs to plan the production mix in order […]

The following are some other cost techniques which are useful to management’s decision making:

Opportunity Cost

Represents the opportunities which have been forgone by following one course of action rather than an alternative course.
The opportunity cost in this case is the […]

It is important that Management needs to have sufficient and relevant information to make the correct decisions. Hence, the need to understand relevant costs.

What really is Relevant cost?

A relevant cost relates to future expected costs that will differ with each alternative used.
Because […]