The Immanuel Company Has Just Obtained a Request for a Special

question 56

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.
-If Immanuel accepts this special order,the change in monthly net operating income will be a:

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

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Definitions:

Exchange Rate

The exchange rate reflecting the value of one currency compared to another.

Spot Exchange Rate

This is the current exchange rate at which two currencies can be exchanged immediately.

Eurocurrency

Currency deposited by national governments or corporations in banks outside their home market, primarily used for lending, borrowing, and investing internationally.

Political Risk

The risk of losing money due to political instability or changes in government policy affecting an investment.