If a manufacturer is operating at capacity should it accept a special order offer of variable cost plus 40%?

Depends on the capacity rating of the subsystems. Lets say 100% is an 8 hour shift of work. Then there is room for flex. But if it is a 24 hr operation then there is less room for flex. Its dependent on the subsystems.

What are you referring to? Rating on subsystems? What is that?

Lets say you are in manufacturing. Its normal not to run everything at once. There is a process to things. So there is still a little room to do more. Also it has to include subcontractors that a business would use.

If a company is currently operating a capacity should it accept a special order based on variable cost plus 40%?

It seems to me that would be a risk because they would be replacing regular business, does that make sense? With this information I don't know how to determine if 40% makes sense.

Any ideas?

Califdad, in accounting terms, "at capacity" means there is no more capacity without adding extra fixed or incremental type costs. Like for your example, going over 8 hours might mean having to pay overtime, which changes the labor costs involved. An easier example is to just say a machine is already running as much as it can without exploding and more production would mean buying a new machine.

ktdanielson, there is not enough info there to answer the question. There isn't any way to know if 40% would cover the increased capacity.

I just found your other post with this same question. Please do not double post as it confuses the masses. I've moved it to this thread.

Yes, the other option besides increasing capacity is replacing current business, which duh, didn't occur to me and makes more sense. (I think I was more busy addressing what califdad was saying.) I still think you would have to have more information. Like can they replace current business? The 40% is pretty much meaningless as the question is asked.

Thanks for confirming!