Imperial Jewelers is considering a special order for 29 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 29 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $406.00 and its unit product cost is $265.00 as shown below: Direct materials Direct labor Manufacturing overhead $ 149 83 Unit product cost $ 265 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $6 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 $5 per bracelet and would also require acquisition of a special tool costing $452 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

Explanation / Answer

1) per unit total incremental revenue 366 10614 incremental costs: Variable costs: direct materials 149 4321 direct labor 83 2407 variable overhead 6 174 Special filgree 5 145 total variable costs 243 7047 fixed cost purchase of special tool 452 total incremental costs 7499 incremental net operating income 3115 net financial advantage $3,115 2) yes

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