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 eachbased on the following unit costs:

-Variable production cost$5.60

-Fixed production costs1.60[Based on capacity]

-Variable selling expense1.00

The Immanuel Co has just obtained a request for aspecial orderof 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 willavoidthe selling expenses, but

shipping costs of $0.30 per unit will have to be added.

Required:

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?

2.If Immanuel accepts the special orderas is, what will be the increase in monthly net operating income?

3.What is the lowest price Immanuel should accept on this special order without

losing money

4.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?