Miyamoto Jewelers is considering a special order for 10 handcrafted gold bracele
ID: 2446401 • Letter: M
Question
Miyamoto Jewelers is considering a special order for 10 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $389.95 and its unit product cost is $264.00 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, $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 $465 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.
What effect would accepting this order have on the company's net operating income if a special price of $349.95 is offered per bracelet for this order? (Round your answers to 2 decimal places.)
Miyamoto Jewelers is considering a special order for 10 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $389.95 and its unit product cost is $264.00 as shown below:
Explanation / Answer
Statement showing evaluation of special order Particulars Amount Selling price per unit 349.95 No of units 10.00 Total Sales 3,499.50 Variable Costs: Direct Materials 143*10 1,430.00 Direct Labour 86*10 860.00 Manu O/H 7*10 70.00 Additional Mat 6*10 60.00 Total Variable Costs 2,420.00 Contribution = Sales-VC 1,079.50 Special Tools cost 465.00 Income 614.50 Thus special order should be accepted . Ans is yes