Fairytale Jewelry Manufacturing Company is considering a special order for 25 handcrafted gold bracelets to be given as gifts to members of a wedding entourage. The normal selling price of a gold bracelet is $200.00 and its unit product cost is $160.00 as shown below:
Direct Materials $100.00 Direct Labor 50.00 Manufacturing Overhead 10.00
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $4.00 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 titanium material applied to the bracelets. This titanium would require additional materials costing $5.00 per bracelet and would also require acquisition of a special tool costing $330 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order.
Required: 10. Relevant cost to accept the special order per bracelet (per unit). 11. Total ($) increase in income of accepting the special order if the selling price is set at $175.00.

Transcribed Image Text:

Problem 4 Fairytale Jewelry Manufacturing Company is considering a special order for 25 handcrafted gold bracelets to be given as gifts to members of a wedding entourage. The normal selling price of a gold bracelet is $200.00 and its unit product cost is $160.00 as shown below: Direct Materials $100.00 Direct Labor 50.00 Manufacturing Overhead 10.00 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $4.00 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 titanium material applied to the bracelets. This titanium would require additional materials costing $5.00 per bracelet and would also require acquisition of a special tool costing $330 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order. Required: 10. Relevant cost to accept the special order per bracelet (per unit). 11. Total ($) increase in income of accepting the special order if the selling price is set at $175.00. Problem 4 Fairytale Jewelry Manufacturing Company is considering a special order for 25 handcrafted gold bracelets to be given as gifts to members of a wedding entourage. The normal selling price of a gold bracelet is $200.00 and its unit product cost is $160.00 as shown below: Direct Materials $100.00 Direct Labor 50.00 Manufacturing Overhead 10.00 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $4.00 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 titanium material applied to the bracelets. This titanium would require additional materials costing $5.00 per bracelet and would also require acquisition of a special tool costing $330 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order. Required: 10. Relevant cost to accept the special order per bracelet (per unit). 11. Total ($) increase in income of accepting the special order if the selling price is set at $175.00.

Answer rating: 100% (QA)

Answer Particulars Per Unit Total 25 Bracelets Incremental Revenue 175 4375 Inc... View the full answer