Exercise 4 (Evaluating Special Order) Glamour 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 P3,899.50 and its unit product cost is P2,640.00 as shown below: Manufacturing overhead. Unit product cost . Materials.. Direct labor...... P1,430.00 860.00 350.00 P2.640.00 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, P70 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 P60 per bracelet and would also require acquisition of a special tool costing P4,650 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. Required: What effect would accepting this order have on the company's net operating income if a special price of P3,499.50 is offered per bracelet for this order? Should the special order be accepted at this price?
Exercise 4 (Evaluating Special Order) Glamour 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 P3,899.50 and its unit product cost is P2,640.00 as shown below: Manufacturing overhead. Unit product cost . Materials.. Direct labor...... P1,430.00 860.00 350.00 P2.640.00 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, P70 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 P60 per bracelet and would also require acquisition of a special tool costing P4,650 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. Required: What effect would accepting this order have on the company's net operating income if a special price of P3,499.50 is offered per bracelet for this order? Should the special order be accepted at this price?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Exercise 4 (Evaluating Special Order)
Glamour 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 P3,899.50 and its unit product cost is
P2,640.00 as shown below:
Materials.
Direct labor..
P1,430.00
860.00
Manufacturing overhead.
Unit product cost...
350.00
P2,640.00
Most of the manufacturing overhead is fixed and unaffected by variations in
how much jewelry is produced in any given period. However, P70 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 P60 per bracelet and would also require acquisition of a
special tool costing P4,650 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.
Required:
What effect would accepting this order have on the company's net operating
income if a special price of P3,499.50 is offered per bracelet for this order?
Should the special order be accepted at this price?
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