The Immanuel Company Has Just Obtained a Request for a Special

question 149

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: If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of $0.30 per unit. Total fixed production cost would not be affected by this order.
-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 net operating income will be:

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

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Definitions:

Liability

Legal responsibility for one's actions or omissions, which can result in an obligation to compensate for any resulting damages or losses.

Debt

an obligation, typically financial, owed by one party to another.

Retires

The act of leaving one's job and ceasing to work, typically due to reaching a certain age or for health reasons.

Liability on Debts

The legal responsibility to pay money owed to creditors, either by an individual or a company.