ACCOUNTING 2 Attempt Question 4 (of 7 value: 5.14 points Imperial Jewelers is co

Question

ACCOUNTING 2 Attempt Question 4 (of 7 value: 5.14 points Imperial Jewelers is considering a special order for 16 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is S401.00 and its unit product cost is $256.00 as shown below Direct materials Direct labor Manufacturing overhead 141 81 34 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, $14 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 $13 per bracelet and would also require acquisition of a special tool costing $450 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 $361.00 per bracelet is offered for this order? (Enter all amounts as positive values.)

Explanation / Answer

Should the special order be accepted at this price?

YES (as there is an increase in the net operating income)

Per unit Total 16 Braceletes Incremental revenue 361 5,776 (16*361) Incremental costs : Variable costs : Direct materials 141 2,256 (16*141) Direct labour 81 1,296 (16*81) Variable manufacturing overhead 14 224 (16*14) Special filigree 13 208 (16*13) Total variable cost 3,984 Fixed costs : Purchase of special tool 450 Total incremental cost 4,434 Incremental net operating income (loss) 1,342

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