Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says the unit product cost for this bracelet is $264.00, as shown below: Direct materials. Direct labor Manufacturing overhead Unit product cost $ 146 86 32 $264 A wedding party has approached Imperial Jewelers about buying 28 gold bracelets for the discounted price of $362.00 each. The wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $6. Imperial Jewelers would have to buy a special tool for $454 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order, Imperial Jewelers determined most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $7.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes 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 existing manufacturing capacity.
Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says the unit product cost for this bracelet is $264.00, as shown below: Direct materials. Direct labor Manufacturing overhead Unit product cost $ 146 86 32 $264 A wedding party has approached Imperial Jewelers about buying 28 gold bracelets for the discounted price of $362.00 each. The wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $6. Imperial Jewelers would have to buy a special tool for $454 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order, Imperial Jewelers determined most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $7.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes 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 existing manufacturing capacity.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:**Imperial Jewelers Financial Analysis of Special Order**
Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company’s accounting system indicates the unit product cost for this bracelet is $264.00. The breakdown is as follows:
- **Direct materials:** $146
- **Direct labor:** $86
- **Manufacturing overhead:** $32
- **Unit product cost:** $264
A wedding party has approached Imperial Jewelers to purchase 28 gold bracelets at a discounted price of $362.00 each. They request a special filigree, increasing the direct materials cost by $6 per bracelet. Imperial Jewelers must purchase a special tool for $454 to apply the filigree, which will have no use afterward.
**Manufacturing Overhead Analysis:**
- Most manufacturing overhead is fixed.
- $7.00 of the overhead is variable based on the number of bracelets produced.
- Accepting the order is believed to have no effect on other production or sales.
**Company’s Capacity:**
- The company can fulfill the order using existing resources.
**Required Analysis:**
1. **What is the financial advantage (disadvantage) of accepting the wedding party’s special order?**
2. **Should the company accept the special order?**
**Instructions for Analysis:**
Complete the analysis by entering your answers in the sections provided:
- **Required 1:** Calculate the financial advantage or disadvantage.
- **Required 2:** Decide if the company should accept the order based on the financial implications.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education