Question

In: Accounting

Imperial Jewelers is considering a special order for 12 handcrafted gold bracelets to be given as...

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 $407.00 and its unit product cost is $272.00 as shown below:

  Direct materials $ 146    
  Direct labor 86    
  Manufacturing overhead 40    
  Unit product cost $ 272    

Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $11 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 $10 per bracelet and would also require acquisition of a special tool costing $451 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.

Required:
1.

What effect would accepting this order have on the company’s net operating income if a special price of $367.00 per bracelet is offered for this order? (Enter all amounts as positive values.)


2. Should the special order be accepted at this price?
Yes
No

Solutions

Expert Solution

1.

Per unit Total 12 Bracelets (per unit cost*12)
Incremental Revenue $         407 $                                                                4,884
Incremental Costs
Variable Costs
Direct Material   $         146 $                                                                1,752
Direct Labour $           86 $                                                                1,032
Variable Manufacturing OH $           11 $                                                                   132
Special filigree $           10 $                                                                   120
Total Variable cost $         253 $                                                                3,036
Fixed Costs
Purchase of Special Tool $                                                                   451
Total Incremental Cost $                                                                3,487
Financial Advantage $                                                                1,397

2. Should accept the order. so they can earn an additional income of $1,397

You can reach me over comment box, if you have any doubts. Please rate this answer


Related Solutions

Imperial Jewelers is considering a special order for 17 handcrafted gold bracelets to be given as...
Imperial Jewelers is considering a special order for 17 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $404.00 and its unit product cost is $267.00 as shown below: Direct materials $ 149 Direct labor 86 Manufacturing overhead 32 Unit product cost $ 267 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However,...
Imperial Jewelers is considering a special order for 17 handcrafted gold bracelets to be given as...
Imperial Jewelers is considering a special order for 17 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $408.00 and its unit product cost is $262.00 as shown below: Direct materials $ 147 Direct labor 85 Manufacturing overhead 30 Unit product cost $ 262 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However,...
Imperial Jewelers is considering a special order for 16 handcrafted gold bracelets to be given as...
Imperial Jewelers is considering a special order for 16 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $402.00 and its unit product cost is $258.00 as shown below: Direct materials $ 142      Direct labor 82   Manufacturing overhead 34     Unit product cost $ 258 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period....
Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as...
Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $189.95 and its unit product cost is $149.00 as shown below: Direct materials $ 84.00 Direct labor 45.00 Manufacturing overhead 20.00 Unit product cost $ 149.00 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However,...
Imperial Jewelers is considering a special order for 23 handcrafted gold bracelets to be given as...
Imperial Jewelers is considering a special order for 23 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $407.00 and its unit product cost is $275.00 as shown below: Direct Materials $149 Direct labor $87 Manufacturing Overhead $39 Unit Product cost $275 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $11 of...
Imperial Jewelers is considering a special order for 23 handcrafted gold bracelets to be given as...
Imperial Jewelers is considering a special order for 23 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $408.00 and its unit product cost is $268.00 as shown below:   Direct materials $ 141       Direct labor 88       Manufacturing overhead 39       Unit product cost $ 268     Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in...
Imperial Jewelers is considering a special order for 21 handcrafted gold bracelets to be given as...
Imperial Jewelers is considering a special order for 21 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $409.00 and its unit product cost is $266.00 as shown below:   Direct materials $ 143       Direct labor 86       Manufacturing overhead 37       Unit product cost $ 266     Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in...
Exercise 12-4 Evaluating a Special Order [LO12-4] Imperial Jewelers is considering a special order for 25...
Exercise 12-4 Evaluating a Special Order [LO12-4] Imperial Jewelers is considering a special order for 25 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 $264.00 as shown below:   Direct materials $ 147       Direct labor 83       Manufacturing overhead 34       Unit product cost $ 264     Most of the manufacturing overhead is fixed and unaffected by variations...
ABC is considering a special order for 20 gold bracelets for a wedding party. The usual...
ABC is considering a special order for 20 gold bracelets for a wedding party. The usual selling price is $190 and the estimated unit cost is $149 ($86 in direct materials, $45 in direct labor, and $25 in overhead). The overhead is fixed except $4 per unit. Custom engraving for this order will add $2 in materials per bracelet and require rental of a specific machine for $200 (no other use). There would be no effect on other sales or...
Imperial Jewelers manufactures and sells a gold bracelet for $409.00. The company’s accounting system says that...
Imperial Jewelers manufactures and sells a gold bracelet for $409.00. The company’s accounting system says that the unit product cost for this bracelet is $271.00 as shown below: Direct materials $ 144 Direct labor 89 Manufacturing overhead 38 Unit product cost $ 271 The members of a wedding party have approached Imperial Jewelers about buying 26 of these gold bracelets for the discounted price of $369.00 each. The members of the wedding party would like special filigree applied to the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT