The Immanuel Company has just obtained a request for a special order of 6,000 jigs...
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The 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:
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 any selling expense; however, it will incur shipping costs of $0.30 per unit.
Variable production cost ... $4.60
Fixed production cost ...... 1.80
Variable selling expense ... 1.00
At what selling price per unit should Immanuel be indifferent between accepting or rejecting the special offer?
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