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Special Orders and Classes of Customers

Another useful application of these techniques is in evaluating special orders and alternative pricing for different classes of customers. For example, suppose our sales manager approaches us with an order request from a new customer who is willing to pay $7 per unit. Should we take it? Our immediate reaction might be to turn it down because it is below our normal selling cost of $8. Another reason to turn it down is that it’s less than our costs (our costs last month were $7.60 per unit), so we’ll lose money on the job. But on closer inspection, that’s not the case. In fact, we learned that each additional u...


Cover of Financial Literacy for Managers: Finance and Accounting for Better Decision-Making


If your department handles special orders or offers alternative pricing for specific classes of customers, there are important factors to consider before determining your pricing. Learn about these factors and how to think about them strategically.