Reference: 09-03
Immanuel Company Has Just Obtained a Request for a Special

question 52

Multiple Choice

Reference: 09-03
Immanuel Company has just obtained a request for a special order of 6,000 jigs to be shipped at the end of the month at a selling price of $7 each. The company has a production capacity of 90,000 jigs per month with total fixed production costs of $144,000. At present, the company is selling 80,000 jigs per month through regular channels at a selling price of $11 each. For these regular sales, the cost for one jig is: $$\begin{array} { | l | c | } \hline \text { Variable production cost } & \$ 4.60 \\\hline \text { Fixed production cost } & 1.80 \\\hline \text { Variable selling expense } & 1.00 \\\hline\end{array}$$ If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of $0.30 per unit.
-Suppose that regular sales of jigs total 85,000 units per month. All other conditions remain the same. If Immanuel accepts the special order, the change in monthly operating income will be?

• A)$14,400 increase.
• B)$7,200 increase.
• C)$5,400 decrease.
• D)$3,600 decrease.

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Definitions:

Carbowax

A trade name for a series of polyethylene glycols commonly used as solvents, lubricants, and in pharmaceutical formulations.

Ethylene Oxide

An organic compound that is a colorless gas with a sweet odor, used as a sterilizing agent and an intermediate in the production of other chemicals.

Anionic

Pertaining to ions or molecules that carry a negative electric charge.

Cationic Polymerization

A type of polymerization where the growth of a polymer chain proceeds via cationic species as the propagating centers.