Exercise 10-4 Evaluating a Special Order [LO10-4] Imperial Jewelers is consideri
ID: 2467714 • Letter: E
Question
Exercise 10-4 Evaluating a Special Order [LO10-4]
Imperial Jewelers is considering a special order for 19 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $400.00 and its unit product cost is $276.00 as shown below:
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $7 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 $6 per bracelet and would also require acquisition of a special tool costing $463 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 $360.00 per bracelet is offered for this order? (Enter all amounts as positive values.)
Imperial Jewelers is considering a special order for 19 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $400.00 and its unit product cost is $276.00 as shown below:
Explanation / Answer
Ans-
Increased profit=1646
Yes ,it should accept.
Detail Units $ Total Sales Value 19 $ 360.00 6,840 Less:- Direct materials 19 $ 150.00 2,850 Direct labor 19 $ 86.00 1,634 Manufacturing overhead Variable 19 $ 7.00 133 Additional materials 19 $ 6.00 114 Balance 2,109 Special tool costing 463 Profit 1,646Related Questions
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