3 Miyamoto Jewelers is considering a special order for 10 handcrafted gold brace
ID: 2453441 • Letter: 3
Question
3
Miyamoto Jewelers is considering a special order for 10 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $389.95 and its unit product cost is $264.00 as shown below:
Direct materials
$
143.00
Direct labor
86.00
Manufacturing overhead
35.00
Unit product cost
$
264.00
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $7 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 $6 per bracelet and would also require acquisition of a special tool costing $465 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:
What effect would accepting this order have on the company's net operating income if a special price of $349.95 is offered per bracelet for this order? (Round your answers to 2 decimal places.)
Per
Total 10
Unit*******
bracelets
Incremental revenue
Incremental costs:
Variable costs:
Direct materials
Direct labor
Variable manufacturing overhead
Special filigree
Total variable cost
Fixed costs:
Purchase of special tool
Total incremental cost
Incremental net operating income (loss)
Should the special order be accepted at this price? Yes or No
Miyamoto Jewelers is considering a special order for 10 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $389.95 and its unit product cost is $264.00 as shown below:
Explanation / Answer
Solution-
Yes, Special order be accepted at this price.
Explanation-
The company regular price is high than the special order, So the special order be accepted at this price.
Per Unit Total10 bracelets Incremental revenue $349.95 $3,499.50 Incremental costs: Variable costs: Direct materials $143 $1,430 Direct labor $86 $860 Variable manufacturing overhead $7 $70 Special filigree $6 $60 Total variable cost $242 $2,420 Fixed costs: Purchase of special tool $465 Total incremental cost $2,885 Incremental net operating income $614.50Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.