Special order decision
In one sentenceEvaluating a one-time order at a price below the usual price by comparing its price only with the additional costs it will cause.
Simply put
If you have unused capacity and fixed costs will not increase, any price above variable cost adds profit.
Watch two things: that the order does not affect your existing customers and their prices, and that the capacity is really available without stopping other production.
Worked example
A juice factory's usual price is 50 SAR per carton and its variable cost is 30 SAR; it has spare capacity and received an offer to buy 1,000 cartons at 38 SAR.
Order price − variable cost38 − 30 = 8 SAR
Number of cartons1,000 cartons
Fixed costsUnchanged
Additional profit from the order8 × 1,000 = 8,000 SAR
Don't confuse it with
Contribution marginThe decision here depends on the order's contribution margin, not on the full unit cost.