Imperial Jewelers manufactures and sells a gold bracelet for $405.00. The company's accounting system says that the unit product cost for this bracelet is $275,00 as shown below: Direct materials Direct labor Manufacturing overhead Unit product cont $ 149 90 36 $275 The members of a wedding party have approached Imperial Jewelers about buying 24 of these gold bracelets for the discounted price of $365.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $13. Imperial Jewelers would also have to buy a special tool for $455 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 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, $14.00 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. 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? Complete this question by entering your answers in the tabs below. Required 11 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party?
Imperial Jewelers manufactures and sells a gold bracelet for $405.00. The company's accounting system says that the unit product cost for this bracelet is $275,00 as shown below: Direct materials Direct labor Manufacturing overhead Unit product cont $ 149 90 36 $275 The members of a wedding party have approached Imperial Jewelers about buying 24 of these gold bracelets for the discounted price of $365.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $13. Imperial Jewelers would also have to buy a special tool for $455 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 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, $14.00 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. 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? Complete this question by entering your answers in the tabs below. Required 11 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Cost Analysis for Imperial Jewelers' Special Order
**Unit Product Cost Breakdown:**
- Direct materials: $149
- Direct labor: $90
- Manufacturing overhead: $36
- **Total Unit Product Cost:** $275
Imperial Jewelers manufactures and sells a gold bracelet for $405. A wedding party has approached the company to buy 24 gold bracelets at a discounted price of $365 each. Special filigree for the bracelets would increase direct materials cost by $13 per bracelet. Additionally, a special tool costing $455 is required solely for this order.
### Special Order Analysis
- **Manufacturing Overhead:** Mostly fixed, $14 is variable based on production volume.
- **Impact on Operations:** The order doesn't interfere with existing customer sales and can be fulfilled using current manufacturing capacity.
### Required Analyses
1. **Financial Advantage/Disadvantage Evaluation:** Calculate the net financial impact of accepting the special order.
2. **Decision Recommendation:** Determine if the company should proceed with the order based on the evaluation.
**Please provide your analysis and answers in the sections below.**
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