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:

Market Price

The present cost at which a product or service is available for purchase or sale in a specific market.

Total Cost

The cumulative amount of money spent or resources used in the production of goods or services, including fixed and variable costs.

Market Price

The existing price for buying or selling an asset or service in a particular market.

Profit

The financial gain realized when the revenue from business activities exceeds the costs and expenses associated with its operation.