Question

Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The companys accounting system says that the unit prod
manufacturing capacity. Required: 1. What is the financial advantage (disadvantage) of accepting the special order from the w
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Answer #1

Requirement 1

Financial advantage $ 1,996.00

Working

Per Total 21
Unit Bracelets
Incremental revenue $      362.00 $    7,602.00
Incremental cost:
     Variable cost
       Direct material $      145.00 $    3,045.00
       Direct labor $        87.00 $    1,827.00
       Variable manufacturing cost $          7.00 $       147.00
       Cost of special filigree $          6.00 $       126.00
     Total variable cost $      245.00 $    5,145.00
     Fixed cost:
         Purchase of special tool $       461.00
Total incremental cost $    5,606.00
Incremental net Operating income (loss) $    1,996.00

Requirement 2

Yes

The special order should be accepted.

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