members of a wedding party. The normal selling price of a gold bracelet is $406.

Question

members of a wedding party. The normal selling price of a gold bracelet is $406.00 and its unit product cost is $263.00 as shown below: Imperial Jewelers is considering a special order for 19 handcrafted gold bracelets to be given as gifts to $141 89 Direct materials Direct labor Manufacturing overhead Unit product cost $ 263 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 $469 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 $366.00 per bracelet is offered for this order? (Enter all amounts as positive values.) Per Total 19 Unit Bracelets Incremental revenue Incremental costs: Variable costs: Direct materials Direct labor Variable manufacturing overhead Special filigree Total variable cost Fxed costs Purchase of special tool Total incremental cost Incremental net operating income (loss)

Explanation / Answer

Particulars No. of Units Per unit amount ($) Total Amount ($) Incremental revenue 19 $           406.00 $        7,714.00 Incremental costs A. Variable costs Direct materials 19 $           141.00 $        2,679.00 Direct labor 19 $             89.00 $        1,691.00 Variable manufacturing overhead 19 $               6.00 $           114.00 Special filigree 19 $               5.00 $             95.00 Total variable cost $           241.00 $        4,579.00 B. Fixed costs: Purchase of special tool $           469.00 Total incremental cost $        5,048.00 Incremental net operating income (loss) $        2,666.00

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