Imperial Jewelers is considering a special order for 16 handcrafted gold bracele

Question

Imperial Jewelers is considering a special order for 16 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $404.00 and its unit product cost is $260.00 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. $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. What effect would accepting this order

Explanation / Answer

b) offer should be accepted at it gives incremental revenue of 1324

Per Unit Total 16 Bracelets Incremental Revenue 364 5824 Incremental Cost Variable costs Direct Material 146 2336 Direct Labor 81 1296 Variable Manufacturing Overhead 13 208 Special Filigree 12 192 Total Variable cost 252 4032 Fixed Cost - Already recovered in regular sale 0 Purchase of special Tool 468 Total Incremental cost 4500 Incremental net operating income 1324

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