Exercises Saved Help Save&Exit; Submit Check my work Imperial Jewelers manufactu

ID: 2524187 • Letter: E

Question

Exercises Saved Help Save&Exit; Submit Check my work Imperial Jewelers manufactures and sells a gold bracelet for $406.00. The company's accounting system says that the unit product cost for this bracelet is $259.00 as shown below $142 85 Direet materials Direct labor Manufacturing overhead32 Unit product cost $259 The members of a wedding party have approached Ihperial Jewelers about buying 27 of these gold bracelets for the discounted price of $366.00 each. The members of the wedding party would like special filgree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $450 and that would increase the direct materials cost per bracelet by $5. The special tool would have no other use once the special order is completed To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $6.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and selljewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity. Required: 1 What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order? Complete this question by entering your answers in the tabs below Required 1 Required 2 K Prev 3 of 6E Score answer> 16 MacBook Air

Explanation / Answer

Imperial Jewelers

Determination of the financial advantage (disadvantage) of accepting the special order from the wedding party:

Particulars

Per unit

Total 27 Bracelets

Incremental Revenue

$366

$9,882

Incremental costs:

Variable costs:

Direct material

$142

$3,834

Direct labor

$85

$2,295

Variable manufacturing overhead

$162

Special filigree

$135

Total variable costs

$238

$6,426

Fixed cost:

Purchase of special tool

$450

Total incremental cost

$6,876

Incremental net operating income (loss)

$3,006

Should the special order be accepted at this price? --Yes

Accepting of special order would earn net operating income of $3,006. Imperial Jewelers can accept the special order at the sales price of $366 per unit.

Note:

The fixed costs are not considered for the accept/reject decision as they are period costs, however fixed cost pertaining to the special order (cost of special tool) is taken into consideration as this cost is directly associated to the making of the special order and would have no other use once the order is completed.