Exercise 12-4 Special Order Decision (LO12-4) Imperial Jewelers manufactures and

Question

Exercise 12-4 Special Order Decision (LO12-4) Imperial Jewelers manufactures and sells a gold bracelet for $404.00. The company's accounting system says that the unit product cost for this bracelet is $269.00 as shown below: 50 points Direct materials Direct labor Manufacturing overhead Unit product cost $146 87 36 $269 Skipped eBook The members of a wedding party have approached Imperial Jewelers about buying 18 of these gold bracelets for the discounted pri of $364.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $460 and that would increase the direct materials cost per bracelet by $11. The special tool would have no other use once the special order is completed. Hint To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $12.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its abilit to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity. Print References Required: 1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Should the company accept the special order? OYes ONO

Explanation / Answer

1 Per unit 18 units Incremental revenue 364 6552 Incremental costs: Variable costs: Direct materials 146 2628 Direct labor 87 1566 Variabe manufacturing overhead 12 216 Special filgree 11 198 Total Variable costs 4608 Fixed cots: Special tool 460 Total costs 5068 Fianancial advantage 1484 2 Yes

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