Answer (C) is correct . If idle capacity exists, the lowest feasible price for a special order is one covering the variable cost. Variable costing considers fixed cost to be a period cost, not a product cost. Fixed costs are not relevant to short-term inventory costing with idle capacity because the fixed costs will be incurred whether or not any production occurs. Any additional revenue in excess of the variable costs will decrease losses or increase profits.
Answer (A) is incorrect because Job order is a cost accumulation procedure that may treat fixed costs as product costs.
Answer (B) is incorrect because The process method is a cost accumulation procedure that may treat fixed costs as product costs.
Answer (D) is incorrect because Standard costing attempts to measure deviations from expected costs.
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