Imperial Jewelers is considering a special order for 24 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 24 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $405.00 and its unit product cost is $261.00 as shown below: Direct materials $ 141 Direct labor 87 Manufacturing overhead 33 Unit product cost $ 261 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $13 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 $12 per bracelet and would also require acquisition of a special tool costing $468 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 $365.00 per bracelet is offered for this order? (Enter all amounts as positive values.)
iPad? 9:28 PM 68%- Done ezto.mheducation.com E connect Matthew Trebesh Noreen: Ma Manag I Ac HW5 (Ch. 7) Question 3 (of 10 ? ? Save & Exit Submit : 1.00 points Imperial Jewelers is considering a special order for 24 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal seling price of a gold bracelet is $406.00 and its unit product cost is $261.00 as shown below Direct materials Direct labor 87 Unit product cost Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $13 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 $12 per bracelet and would also require acqusition of a special tool cosing $46?that would have no other use once the specal order is completed. This order would have no effect on the company's regular sales and the order could be fulfiled 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 $365.00 per bracelet is offered for this order? (Enter all amounts as positive values.) 24 Unit Variable costs Direct materials Direct labor Special iligree Total variable cost Fixed costs Purchase of special tool Total incrementall cost Incremental net operating income (loss 2. Should the special order be accepted at this price? No

Explanation / Answer

Per unit Total 24 Brecelets

Incremental revenue (I) 365 8,760

Incremental cost:

Variable cost

Direct materials 141 3,384

Direct labor 87 2,088

Variable manufacturing overhead 13 312

Special filigiri 12 144

Total variable cost 253 5,928

Fixed cost

Purchase of special tool 19.5 468

Total incremental cost (II) 6,396

Incremental net operating income (I-II) 2,364

Since the acceptance of special order will result in increase in the operating income by $2,364, hence the special order must be accepted.

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