Imperial Jewelers is considering a special order for 14 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 14 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $409.00 and its unit product cost is $265.00 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. $6 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 $5 per bracelet and would also require acquisition of a special tool costing $467 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 thi

Explanation / Answer

Yes the special order should be acceprted as it is giving an incremental profit  

Particulars Per Unit 14 Bracelets Incremental Revenue 369 5166 Incremental Costs Variable costs: Direct material 148 2072 Direct labor 86 1204 Variable manufacturing overhead 6 84 Special Filgree 5 70 Total Variable Costs 245 3430 Fixed Costs: Purchase of special tool 467 Total Incremental Cost 3897 Incremental Net operating profit 1269

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