Reference: 09-03
Immanuel Company Has Just Obtained a Request for a Special

Multiple Choice

Reference: 09-03
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: $$\begin{array} { | l | c | } \hline \text { Variable production cost } & \$ 4.60 \\\hline \text { Fixed production cost } & 1.80 \\\hline \text { Variable selling expense } & 1.00 \\\hline\end{array}$$ If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of $0.30 per unit.
-Suppose that regular sales of jigs total 85,000 units per month. All other conditions remain the same. If Immanuel accepts the special order, the change in monthly operating income will be?

A) $14,400 increase.
B) $7,200 increase.
C) $5,400 decrease.
D) $3,600 decrease.