Look Good Jewels (LGJ) is considering a special order for 30 handcrafted gold bracelets for a wedding. The gold bracelets are to be given as gifts to members of the wedding party. The normal selling price of a gold bracelet is $295.00 and its unit product cost is $214.00, as shown: Materials Direct labour Manufacturing overhead Unit product cost $ 110.00 64.00 40.00 $ 214.00 S The manufacturing overhead is largely fixed and unaffected by variations in how much jewellery is produced in any given period. However, 20% of the overhead is variable with respect to the number of bracelets produced. The customer interested in the special bracelet order would like special filigree applied to the bracelets. This would require additional materials costing $2.00 per bracelet and would also require acquisition of a special tool costing $440 that would have no other use once the special order was 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. What effect would accepting this order have on the company's net operating income if a special price of $222.00 was offered per bracelet for this order? Net operating income increases by Should the special order be accepted at this price? Yes O No
Look Good Jewels (LGJ) is considering a special order for 30 handcrafted gold bracelets for a wedding. The gold bracelets are to be given as gifts to members of the wedding party. The normal selling price of a gold bracelet is $295.00 and its unit product cost is $214.00, as shown: Materials Direct labour Manufacturing overhead Unit product cost $ 110.00 64.00 40.00 $ 214.00 S The manufacturing overhead is largely fixed and unaffected by variations in how much jewellery is produced in any given period. However, 20% of the overhead is variable with respect to the number of bracelets produced. The customer interested in the special bracelet order would like special filigree applied to the bracelets. This would require additional materials costing $2.00 per bracelet and would also require acquisition of a special tool costing $440 that would have no other use once the special order was 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. What effect would accepting this order have on the company's net operating income if a special price of $222.00 was offered per bracelet for this order? Net operating income increases by Should the special order be accepted at this price? Yes O No
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Look Good Jewels (LGJ) is considering a special order for 30 handcrafted gold bracelets for a wedding. The gold bracelets are to be
given as gifts to members of the wedding party. The normal selling price of a gold bracelet is $295.00 and its unit product cost is
$214.00, as shown:
Materials
Direct labour
Manufacturing overhead
Unit product cost
$ 110.00
64.00
40.00
$ 214.00
S
The manufacturing overhead is largely fixed and unaffected by variations in how much jewellery is produced in any given period.
However, 20% of the overhead is variable with respect to the number of bracelets produced. The customer interested in the special
bracelet order would like special filigree applied to the bracelets. This would require additional materials costing $2.00 per bracelet
and would also require acquisition of a special tool costing $440 that would have no other use once the special order was 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.
What effect would accepting this order have on the company's net operating income if a special price of $222.00 was offered per
bracelet for this order?
Net operating income
increases
by
Should the special order be accepted at this price?
Yes
O No
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VIEWStep 3: Calculating the total revenue from the special order & the total relevant cost for the special order
VIEWStep 4: Calculating the increase (decrease) in the net operating income.
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