Imperial Jewelers is considering a special order for 19 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 19 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is S404.00 and its unit product cost is $263.00 as shown below: s 150 Direct labor Manufacturing overhead Unit product cost Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $10 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 $9 per bracelet and would also require acquisition of a special tool costing $451 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 $364.00 per bracelet is offered for this order? (Enter all amounts as positive values.) Direct materials Dinect labor Faxed costs 2Should the special order be accepted at this price?

Explanation / Answer

1 Total Marginal Cost of each bracelet is Incremental revenue 364 6916 Incremental costs: Variable Costs Direct Material 150 2850 Direct Labor 82 1558 Variable Manufacturing Overhead 10 190 Special Filigree 9 171 Total Variable Costs 251 4769 Fixed Costs Purchase Of Special tool 451 Total Incrementa Costs 5220 Incremental Net Operating Income 1696 Yes ,Speccial order be accepted.Even though the special order is below the company's regular price for such an item, the special order would add to the company's net operating income and should be accepted.

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