Check my work 3 Imperial Jewelers manufactures and sells a gold bracelet for $40
ID: 2536450 • Letter: C
Question
Check my work 3 Imperial Jewelers manufactures and sells a gold bracelet for $406.00. The company's accounting system says that the unit product cost for this bracelet is $26700 as shown below: 10 points Direct materials Direct labor Manufacturing overhead Unit product cost $144 86 3 7 $267 eBook Hint Print References The members of a wedding party have approached Imperial Jewelers about buying 23 of these gold bracelets for the discounted price of $366.00 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 $452 and that would increase the direct materials cost per bracelet by $6. The special tool would have no other use once the special order is completed. 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, $700 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 ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity 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?Explanation / Answer
Per unit Total 23 bracelets Incremental revenue 366 8418 Incremental costs: Variable costs: Direct materials 144 3312 Direct labor 86 1978 Variable manufacturing overhead 7 161 Special filgree 6 138 Total variable cost 243 5589 Fixed costs: Purchase of special tool 452 Total Incremental costs 6041 Incremental net operating income(loss) 2377 2 Yes