Question

ost for this bracelet is $255.00 as shown below. $144 Direct materials Direct labor Manufacturing overhead Unit product cost The members of a wedding party have approached Imperial Jewelers about buying 22 of these gold bracelets for the discounted price of $366.00 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 $5. 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, $6.00 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

Answer is given below

Total $8,052 Calculation of incremental profit per unit Total units Sales $366 Less: Variable cost Direct Material- Revised $149 Direct Labor $80 Variable Overhead Contribution $131 Less: Incremental cost Special Tool Cost Incremental profit $3,278 $1,760 $132 $2,882 $458 $2,424 Financial advantage is $ 2,424 of accepting order Note: Fixed cost is not relevant for evaluation of this special order 2. Based on above working the special orders should be accepted