Imperial Jewelers is considering a special order for 18 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 18 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 $268.00 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 $469 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

Explanation / Answer

Per Unit Total 18 Incremental revenue 368 6624 Incrmental Cost Variable Cost Direct material 149 2682 Direct labour 84 1512 variable manufacturing overhead 13 234 Special Filligree 12 216 Total variable Cost 258 4644 Fixed Cost Purchcase of special tool 469 Total incremental cost 5113 Incremental net operating income 1511 Incremental revenue is more than incremental cost then yes accept the special order

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