A Profit-planning Support System
In many industries, managers are regularly called upon to decide whether to accept significant and unusual orders. In these circumstances, the manager must decide whether the benefits from accepting the order exceed the cost of filling it. Obviously, if the revenues which can be expected from the order are insufficient to cover the labor, materials, and other direct costs of filling the order, the decision is easily taken to refuse the order. Even if this hurdle is successfully cleared, the manager must bear in mind that the filling of the order will consume not only dollars but also valuable capacity. In accepting the order, the manager is committing the resources of his organization for some time into the future. He thereby foregoes the opportunity to devote these resources to some alternative use. If there are no such alternatives, of course, the problem becomes one of simple profitability once again. But if the business or part of the business is already working full tilt, the manager must be satisfied that the new opportunity has greater merit than some presently scheduled activity, before he accepts the order.
KeywordsExpense Line Product
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