Question

Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says that the unit product cost for this bracelet is $278.00 as shown below: 1.5 points $150 89 Direct materials rials Direct labor Manufacturing overhead Unit product cost 39 Skipped $278 eBook The members of a wedding party have approached Imperial Jewelers about buying 19 of these gold bracelets for the discounted price of $362.00 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 $456 and that would increase the direct materials cost per bracelet by $9. The special tool would have no other use once the special order is completed. Hint 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, $10.00 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. Print References 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? Required 1 Required 2 >

Answer 1

2) Incremental analysis

	Per unit	Total
Incremental revenue	362	362*19 = 6878
Incremental cost
Direct material	159	159*19 = 3021
Direct labor	89	89*19 = 1691
Variable manufacturing overhead	10	10*19 = 190
Total Variable cost	258	4902
Fixed cost		456
Total incremental cost		5358
Incremental profit (loss)		1520

b) Yes, accept the special order

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