Question

Imperial Jewelers manufactures and sells a gold bracelet for $401.00. The company's accounting system says that the unit product cost for this bracelet is $262.00 as shown below. Direct materials Direct labor Manufacturing overhead Unit product cost $149 82 31 $262 5 The members of a wedding party have approached Imperial Jewelers about buying 30 of these gold bracelets for the discounted price of $361.00 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 $458 and that would increase the direct materials cost per bracelet by $10. 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, $11.00 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 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party?

Answer 1

1.

	Per unit	Total 30 Bracelets (per unit cost*30)
Incremental Revenue	$         361	$                                                             10,830
Incremental Costs
Variable Costs
Direct Material	$         149	$                                                                4,470
Direct Labour	$           82	$                                                                2,460
Variable Manufacturing OH	$           11	$                                                                   330
Special filigree	$           10	$                                                                   300
Total Variable cost	$         252	$                                                                7,560
Fixed Costs
Purchase of Special Tool		$                                                                   458
Total Incremental Cost		$                                                                8,018
Financial Advantage		$                                                                2,812

2. Company should accept the order. so they can earn an additional income of $2,812

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