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What will be the change in monthly operating income

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Reference no: EM132548001

The Immanuel Co 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 $7.00 each. The Company has a production capacity of 90,000 jigs per month with total fixed production cost of $144,000. At present the Company is selling 80,000 jigs per month through regular channels at a selling price of $11.00 each. For these regular sales the cost of one jig is

Variable production cost $4.60

Fixed production cost $1.80

Variable selling expense $1.00

If the special order is accepted Immanuel will not incur selling expense however it will incur shipping cost of $0.30 per unit.

Question 1. If Immanuel accepts the special order what will be the increase in the monthly operating income?

Question 2. At what selling price per unit should Immanuel be indifferent between accepting or rejecting special order?

Question 3. Suppose the total regular sales of jigs are 85,000 units per month, and all other conditions remain the same. If Immanuel accepts the special order, what will be the change in monthly operating income?

Reference no: EM132548001

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