The Immanuel Company Has Just Obtained a Request for a Special

question 92

Multiple Choice

The 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: $\begin{array}{|l|r|}\hline \text { Variable Production Cost } & \$ 4.60 \\\hline \text { Fixed Production Cost } & \$ 1.80 \\\hline \text { Variable Selling Expense } & \$ 1.00 \\\hline\end{array}$
If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of $\$ 0.30$ per unit.
-If Immanuel accepts this special order,what will be the increase in the monthly operating income?

• A) $1,800.
• B) $3,600.
• C) $12,600.
• D) $14,400.

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Definitions:

Payroll Tax Expense

Expenses that a business incurs to cover government taxes on employee wages, including social security and Medicare taxes in the United States.

Union Dues

Membership fees paid by workers to labor unions for representation and services provided.

State Income Tax

A tax levied by a state on the income earned by its residents and businesses operating within the state.

Federal Income Tax

Tax levied by the federal government on individuals, corporations, estates, and other entities' annual earnings.