Reference no: EM132775110

The Immanuel Company has the capacity to produce 75,000 bins per month.

Fixed production costs are $120,000 per month, and the company currently sells 70,000 bins at $13 each based on the following unit costs:

• Variable production cost $5.60
• Fixed production costs 1.60 [Based on capacity]
• Variable selling expense 1.00

The Immanuel Co has just obtained a request for a special order of 6,000 bins to be shipped at the end of the month at a selling price of $10 each. The price and the terms are open to negotiation. If the special order is accepted, the company will avoid the selling expenses, but shipping costs of $0.30 per unit will have to be added.

Required:

Problem 1: List 5 non-financial/financial issues that should be considered before accepting or rejecting this order. Should they accept the order? With what conditions?

Problem 2: If Immanuel accepts the special order as is, what will be the increase in monthly net operating income?