Q.1 The Immanuel Company has the capacity to produce 75,000 bins per month. Fixed production costs...

Q.1

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:

List 5 non-financial/financial issues that should be considered before accepting or rejecting this order. Should they accept the order? With what conditions?
If Immanuel accepts the special order as is, what will be the increase in monthly net operating income?
What is the lowest price Immanuel should accept on this special order without losing money
If Immanuel had regular sales of 71,000 bins per month, what would be the change in monthly operating income if it accepted the special order?

Expert Solution

ekkarill92 answered 2 years ago

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