Imperial Jewelers is considering a special order for 29 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 29 handcrafted gold bracelets to be given as gifts to members of a wedding party The normal selling price of a gold bracelet is S403 00 and its unit product cost is $270.00 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. $14 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 $13 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 $ existing capacity without affecting any other order. Required: Required: What effect would accepti

Explanation / Answer

By producing additional units Revenue may increase by $1855

Per Unit Total 29 Bracelets Incremental Revenue (363- 270) 93 2697 Incremental Costs Variable Costs Direct Materials Direct Labour Var. Mfg Overheads Special Filigree -13 -377 Total Variable Costs -13 -377 Fixed Costs Purchase of Special Tools -465 Total Incremental Costs -842 Incremental Net Operating Income (Loss) 1855

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