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

question 13

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.
-At what selling price per unit should Immanuel be indifferent between accepting or rejecting the special offer?

• A)$7.40.
• B)$4.90.
• C)$6.40.
• D)$7.70.

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