BAR Relevant Costs · Updated November 2026
Special Order With Idle Capacity: Which Costs Are Relevant?
With idle capacity, focus on what actually changes if the order is accepted.
Relevant costs
Incremental materials, labor, variable overhead, shipping, customization, and other costs caused by the order are relevant.
Allocated fixed costs
Existing fixed overhead is usually irrelevant if it continues regardless of the decision.
Opportunity cost
If the order uses capacity that could serve another profitable use, lost contribution becomes relevant.
Exam strategy
Build the decision from incremental cash effects, not full unit cost.
The takeaway
With genuine idle capacity, special-order analysis focuses on incremental costs and any opportunity cost, not allocated fixed overhead.
Related Summit resources
FAQ
Is existing fixed overhead always relevant?
No.
When does opportunity cost matter?
When another profitable use of capacity is displaced.
What is the best starting point?
Identify cash flows that change.