Question

Question form | Save & Ea Subert 5.45 points Exercise 7-4 Evaluating a Special Order (LO7-4) 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 5189 55 and its unit product cost is $149 00 as shown below Direct labor Manufacturing overhead Unit product cost Most of the manufacturing overhead is fxed and unaffected by variations in how much jewelry is produced in any given period. However, $400 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 fligree would require additional materials costing $200 per bracelet and would also require acquisition of a special tool costing $250 that would have no other use once the special order is completed. This order would have no efied on the company's regular sales and the order could be fulfilled using the company's existing capacity without allecting any other onder Required 1 What affect would accepting this order have on the company's net operating Income a special price of $169 95 per bracelet is offered for this order? (Enter all amounts as positive values. Round your answers to 2 decimal places) Per Unit T otal for 20 Bracelets Incremental revenue Incremental costs Variable costs Direct materials Direct labor Variable manutacturing overhead Special gree Total variable cost Fored costs Purchase of special tool Total incremental cost incremental net operating income foss) 2. Should the special order be accepted at this price? Hints References eBook & Resources Check my work

Answer 1

Per Unit Total for 20 Bracelets 2 Incremental Revenue venue $ 169.95 $ 3,399 3 Incremental costs: 4 Variable costs: 5 Direct Materials $ 84 $ 1,680 6 Direct labor $ 45 $ 900 7 Variable manufacturing overhead $ 4 $ 8 Special filigree - 2 $ 9 Total variable cost $ 135 $ 2,700 10 Fixed Costs: 11 Purchase of special tool 250 12 Total Incremental cost 2,950 13 Incremental Net Operating Income(Loss) 449 14 15 Yes, the special order should be accepted, as there is a incremental income of $449. 40

Per Unit Total for 20 Bracelets 169.95 =+B2*20 1 2 Incremental Revenue 3 Incremental costs: 4 Variable costs: 5 Direct Materials 6 Direct labor 7 Variable manufacturing overhead 8 Special filigree 9 Total variable cost 10 Fixed Costs: Purchase of special tool 12 Total Incremental cost 13 Incremental Net Operating Income(Loss) =+B5*20 =+B6*20 =+B7*20 =+B8*20 =+B9*20 135 250 =+C9+C11 =+C2-C12