Imperial Jewelers is considering a special order for 29 handcrafted gold bracele

Question

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 $402.00 and its unit product cost is $261.00 as shown below Direct materials Direct labor Manufacturing overhead $141 3e3 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, $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.

Explanation / Answer

Incremental analysis :

2) Yes, Special order should be accepted at this price.

Per unit Total Incremental revenue 362 10498 Incremental cost Variable cost Direct material 141 4089 Direct labour 86 2494 Variable overhead 7 203 Special filigree 6 174 Total variable cost 240 6960 Fixed cost Purchase of special tool 463 Total incremental cost 7423 Incremental net operating income (loss) 3075

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.