Question

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 $403.00 and sunt product cost $264.00 as shown below Direct materials Director Marufacturing overhead Und productos $ 149 62 33 $ 264 Most of the manufacturing overhead is fred and unaffected by variations in how much wel is produced in any oven period. However, 19 of the overhead is variable with respect to the number of brace produced. The customer who is interested in the special bracelet order would like special agree applied to the bracelets. This fligree would require additional materials conting sa per bracelet and would also require acquisition of a special tool costing 5461 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 led using the company's existing capacity without affecting any other order Required 1. What affect would accepting this order have on the company's net operating income a special price of $363.00 per bracelet is offered for this order? (Enter all amounts as positive values Per Total 10 Bracelets Incremental revenue Incremental Vario Direct mara Director Variable mandaturing overhead Speciale Total variable cost $ Purchase of special Total incremental cost incremental net opening income 5

Answer 1

	Per	Total 16
	Unit	Bracelets
Incremental revenue	$363	$5,808
Incremental costs:
Variable costs:
Direct material	$149	$2,384
Direct labor	$82	$1,312
Variable manufacturing overhead	$9	$144
Special filgree	$8	$128
Total variable cost	$248	$3,968
Fixed costs:
Purchase of special tool		$461
Total incremental cost		$4,429
Incremental net operating income (loss)		$1,379