Imperial Jewelers is considering a special order for 17 handcrafted gold bracele
ID: 2398525 • Letter: I
Question
Imperial Jewelers is considering a special order for 17 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $408.00 and its unit product cost is $262.00 as shown below:
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $13 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $12 per bracelet and would also require acquisition of a special tool costing $470 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order.
Required:
1. What effect would accepting this order have on the company’s net operating income if a special price of $368.00 per bracelet is offered for this order? (Enter all amounts as positive
2. Should the special order be accepted at this price?
Direct materials $ 147 Direct labor 85 Manufacturing overhead 30 Unit product cost $ 262Explanation / Answer
1.
Should accept the special order. so they can earn an additional income of $1,417
Per unit Total 17 Bracelets Incremental Revenue $ 368.00 $ 6,256 Incremental Costs Variable Costs Direct Material $ 147.00 $ 2,499 Direct Labour $ 85.00 $ 1,445 Variable Manufacturing OH $ 13.00 $ 221 Additional filigree $ 12.00 $ 204 Total Variable cost $ 257.00 $ 4,369 Fixed Costs Purchase of Special Tool $ 470 Total Incremental Cost $ 4,839 Incremental Net operating Income $ 1,417Related Questions
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