Exercise 10-4 Evaluating a Special Order [LO10-4] Imperial Jewelers is consideri
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Question
Exercise 10-4 Evaluating a Special Order [LO10-4]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 $409.00 and its unit product cost is $270.00 as shown below: ", Week 3 Assignme TutorMe Online Topic: Realizing th Topic: Resting on O ezto.mheducat AppsBookmarks Google enido a Face Outlook-mena-1-0) YouTube . Broadc ??$270 00 as shown below. Direct materials Direct labor Manufacturing overhead $ 144 86 40 Unit product cost $ 270 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $12 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 bracelets. This filigree would require additional materials costing $11 per bracelet and would also require acquisition of a special tool costing $467 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 $369.00 per bracelet is offered for this order? (Enter all amounts as positive values.) Total 29 Bracelets Unit Incremental revenue Incremental costs Variable costs: Direct materials Direct labor Variable manufacturing overhead Special filigree Total variable cost Fixed costs Purchase of special tool Total incremental cost Incremental net operating income (loss) 2 Should the special order be accepted at this price? Yes No Type here to search
Explanation / Answer
a) Incremental analysis :
Yes, Special order should be accepted at this price.
Per unit Total Incremental revenue (29*369) 369 10701 Incremental cost Direct material (29*144) 144 4176 Direct labour (29*86) 86 2494 Variable manufacturing overhead (29*12) 12 348 Special filligree (29*11) 11 319 Total variable cost 253 7337 Fixed cost Purchase of special tool 467 Total incremental cost 7804 Incremental net operating income (loss) 2897Related Questions
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