Miyamoto Jewelers is considering a special order for 20 handcrafted gold bracele
ID: 2375703 • Letter: M
Question
Miyamoto Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $409 and its unit product cost is $265 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, $11 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 $10 per bracelet and would also require acquisition of a special tool costing $455 that would have no other use once the special order is completed. This order would have no effect on the company%u2019s regular sales and the order could be fulfilled using the company%u2019s existing capacity without affecting any other order.
What effect would accepting this order have on the company's net operating income if a special price of $369 is offered per bracelet for this order? (Input the amount as a positive value.)
Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Climate-Control for $29 per unit. To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally:
Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to nearest dollar amount.)
Suppose that if the thermostats were purchased, Climate-Control, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be $100,400 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to nearest dollar amount.)
Miyamoto Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $409 and its unit product cost is $265 as shown below:
Explanation / Answer
Hi,
Please find the answers as follows;
Question 1
Question 2:
Part A:
Make = 9 + 11 + 1 + 5*.40 = 23*15400 = 354200
Buy = 29*15400 = 446600
Part B:
Make = 354200 + 100400 = 454600
Buy = 446600
Thanks.
Sales (20*369) 8180 Less
Direct materials (20*149) 2980 Direct Labor (20*82) 1640 Variable Manufacturing Overhead (20*11) 220 Cost of Filgree (20*10) 200 Cost of Special Tool 455 Net Operating Income Increases By: 2685