Imperial Jewelers is considering a special order for 20 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $400.00 and its unit product cost is $256.00 as shown below Direct materials Direct labor Manufacturing overhead 84 31 Unit product cost s 256 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $11 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 $10 per bracelet and would also require acquisition of a special tool costing $461 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 1. What effect would accepting this order have on the company's net operating income if a special price of $360.00 per bracelet is offered for this order? (Enter all amounts as positive values.) Per Unit Bracelets Total 20 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 I net operating income (loss 2. Should the special order be accepted at this price? es O No

Explanation / Answer

per total 20 1) unit Bracelets Incremental revenue 360 7200 incremental costs: Variable costs: Direct Materials 141 2820 Direct labor 84 1680 Variable manufacturing overhead 11 220 Special filigree 10 200 total variable cost 246 4920 fixed costs: purchase of special tool 461 total incremental cost 5381 incremental net operating income(loss) 1819 2) Yes

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