Final answer:
The existence of spare production capacity can impact the decision to accept or reject a special order.
Step-by-step explanation:
Spare production capacity refers to the extra production capacity that a firm has beyond its current level of production. The existence of spare production capacity can impact the decision to accept or reject a special order. When considering whether to accept or reject a special order, the existence of spare production capacity can significantly affect the decision.
If a firm has spare production capacity, it can take on the special order without affecting its regular production. This allows the firm to generate additional revenue and potentially increase its overall profitability. On the other hand, if the firm is already operating at full capacity, accepting a special order may require it to devote resources away from its regular production, which could result in delays or decreased efficiency.