Imperial Jewelers is considering a special order for 27 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 27 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal seling price of a gold bracelet is 540200 and its unit product cost is $270.00 as shown below Direct materials Direct labor Manufacturing overhead 5142 39 5270 Unit product cost Most of the manufacturing overhead is foxed and unaffected by variations in how much jewery 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 59 per bracelat and would also require acquisition of a special tool costing $464 that would have no other use onoe 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 5362.00 per bracelet is offered for this order? (Enter al amounts as positive values.) Unit Bracelets Incremental revenue Incremental costs Variable costs: Direct materials Direct labor Variable manufacturing overhead Special filigree Total variable cost Fixed costs Purchase of special tool Total incremental cost Incremental net operating income (loss) Should the special order be accepted at this price? O No O Yes

Explanation / Answer

Per unit 27 bracelets Incremental revenue 362 9774 Incremental costs: Variable costs: Direct materials 142 3834 Direct labor 89 2403 Variable Manufacturing overhead 10 270 Special filgree 9 243 Total Variable costs 250 6750 Fixed costs: Purchase of special tool 464 Total incremental cost 7214 Incremental net operating income(loss) 2560 2 Yes

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