Imperial Jewelers is considering a special order for 25 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 25 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $410.50 and its unit product cost is $265.00 as shown below:

$265.00

Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $9 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 $8 per bracelet and would also require acquisition of a special tool costing $455 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.

What effect would accepting this order have on the company's net operating income if a special price of $370.50 per bracelet is offered for this order? (Input the amount as positive value. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Imperial Jewelers is considering a special order for 25 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $410.50 and its unit product cost is $265.00 as shown below:

Explanation / Answer

Hi,

Please find the answer as follows:

Net Operating Income would increase by 2632.50

Thanks.

Sales (25*370.50) 9262.50 Direct Material 3650 Direct Labor 2100 Manufacturing Overhead 225 Additional Material Cost 200 Acquisition of Special Tool 455 Net Operating Income 2632.5

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