Imperial Jewelers is considering a special order for 12 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet. is $406.00 and its unit product cost is $265.00 as shown below: Direct materials Direct labor Manufacturing overhead Unit product cost $ 69 147 87 31 265 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $8 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 $7 per bracelet and would also require acquisition of a special tool costing $462 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.
Imperial Jewelers is considering a special order for 12 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet. is $406.00 and its unit product cost is $265.00 as shown below: Direct materials Direct labor Manufacturing overhead Unit product cost $ 69 147 87 31 265 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $8 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 $7 per bracelet and would also require acquisition of a special tool costing $462 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please do not give image format
Transcribed Image Text:Required:
What effect would accepting this order have on the company's net operating income
1. if a special price of $366.00 per bracelet is offered for this order? (Enter all amounts
as positive values.)
Incremental revenue
Incremental costs:
Variable costs
Direct materials
Direct labor
Variable manufacturing overhead
Special filigree
Total variable cost
Fixed costs
Purchase of special tool
Total incremental cost
Incremental net operating income (loss)
10
OYes
O No
$
Per
Unit
0
S
Total 12
Bracelets
2. Should the special order be accepted at this price?
0
0
Transcribed Image Text:Imperial Jewelers is considering a special order for 12 handcrafted gold bracelets to be
given as gifts to members of a wedding party. The normal selling price of a gold bracelet
is $406.00 and its unit product cost is $265.00 as shown below:
Direct materials
Direct labor
Manufacturing overhead
Unit product cost
$
69
147
87
31
265
Most of the manufacturing overhead is fixed and unaffected by variations in how much
jewelry is produced in any given period. However, $8 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 $7 per bracelet and would also require
acquisition of a special tool costing $462 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.
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