Impen Jewelersis o nadar ng a speaal oder or 11 handra ted gold brace cts to b g

Question

Impen Jewelersis o nadar ng a speaal oder or 11 handra ted gold brace cts to b g vens gifts to members of n wadding pany. The nor na seling prioo n gold braoo at is $408.00 and unit product o st $274.00 as shown blow Direct matoriala Direct labor Manufacturing overhead Unit product cost 87 39 $274 Most o the menu actu ove ead is ted and ua ected by v riatons n ha much e we ry is produced in any nen penod. However, 7 of the ove ead is variable it respect to the nurm er o bracelets pro uced. The customerwhinterested in te speaa brace at order would lke special tligre applied to the bracelets. This filgree would require additonal materials costing $ per bracelet and wouid also require acqusition of a special tool costing $453 that would have no other use once the special order is completed. This crder woud have no effect on the company's regular sales and the order could be fulilled uaing the ccmpany's exiatrg capacity without affoatng any cther order Required: 1. What offect would accepting this ordor havo on the company'a net operating income if a special price of $368.00 por bracolat is affiered for this ordor? (Enter all amounts as positive values.) Unit Vanable costs Direct matenals Direct labor Special fligro Total variable cost Purchase of special noromental nat cparating inooma 2. Should he special order be accepted at this price? Yes No

Explanation / Answer

Per unit 11 units Incremental revenue 368 4048 Cost of making Variable costs: Direct materials 148 1628 Direct labor 87 957 Variable Manufacturing overhead 7 77 Special filigree 6 66 Total Variable costs 2728 Fixed costs: Special tool 453 Total costs 3181 Incremental income/(loss) 867 Financial advantage = $867 2 Yes, the company should accept the special order

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