The Immanuel Company Has Just Obtained a Request for a Special

question 128

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

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

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Definitions:

Principle of Closure

A gestalt psychology principle that the mind tends to perceive incomplete figures as complete by filling in missing information.

Figure-Ground Principle

A visual perception principle that describes how humans differentiate an object (the figure) from its surrounding area (the ground).

Market Position

A brand's unique standing and perception in the minds of consumers relative to competing brands.

Evaluation

Evaluation involves the systematic assessment of the value, performance, or importance of an object, project, or program, based on relevant criteria or standards.