Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says that the unit product cost for this bracelet is $261.00 as shown below: Direct materials $140 Direct labor 83 Manufacturing overhead 38 Unit product cost $261 The members of a wedding party have approached Imperial Jewelers about buying 17 of these gold bracelets for the discounted price of $362.00 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 $454 and that would increase the direct materials cost per bracelet by $9. 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, $10.00 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.
Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says that the unit product cost for this bracelet is $261.00 as shown below: Direct materials $140 Direct labor 83 Manufacturing overhead 38 Unit product cost $261 The members of a wedding party have approached Imperial Jewelers about buying 17 of these gold bracelets for the discounted price of $362.00 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 $454 and that would increase the direct materials cost per bracelet by $9. 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, $10.00 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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What is the financial advantage (disadvantage) of accepting the special order from the wedding party?
Transcribed Image Text:Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says that the unit product
cost for this bracelet is $261.00 as shown below:
Direct materials
$140
Direct labor
83
Manufacturing overhead
38
Unit product cost
$261
The members of a wedding party have approached Imperial Jewelers about buying 17 of these gold bracelets for the discounted price
of $362.00 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 $454 and that would increase the direct materials cost per bracelet by $9. 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, $10.00 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.
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