Mastery Problem: Cost-Based Decision Making Special Order Pricing Differential Analysis: Special Order Pricing Managers must often decide between two or more alternatives. Differential analysis is used in decision making. When using differential analysis, it is important to only include those amounts that are different between the alternatives. Differential cost is subtracted from differential revenue to determine differential income/loss When calculating differential cost, sunk costs are: Fixed costs enufacturing company may receive an offer to sell a product at a price less than the normal price. The decision to accept or reject this offer is Irrelevant costs Relevant costs Variable costs erneyis is only one step in deciding to accept or reject the special offer. Management must also take into consideration nonquantitative data. If the order pricing and uses differential analysis to assist in the decision-making process. Fixed factory overhead must be carefully investigated ecial order decision. In many cases, the special order does not increase fixed factory overhead and is not relevant. (Click here for further d factory overhead and special order pricing.) company accepts the offer, will the additional units of product on the market affect the market price of the product? If other customers find out that the product is being sold for less than the normal market price, will they become dissatisfied and stop buying from the company? These nonquantitative issues will influence the success or failure of a special order decision