Imperial Jewelers manufactures and sells a gold bracelet for $407.00. The company's accounting system says that...
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Imperial Jewelers manufactures and sells a gold bracelet for $407.00. The company's accounting system says that the unit product cost for this bracelet is $264.00 as shown below. $143 Direct materials Direct labor 86 Manufacturing overhead 35 Unit product cost $264 The members of a wedding party have approached Imperial Jewelers about buying 14 of these gold bracelets for the discounted price of $367.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $4. Imperial Jewelers would also have to buy a special tool for $462 to apply the filigree to the bracelets. 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, $5.00 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? Imperial Jewelers manufactures and sells a gold bracelet for $407.00. The company's accounting system says that the unit product cost for this bracelet is $264.00 as shown below. $143 Direct materials Direct labor 86 Manufacturing overhead 35 Unit product cost $264 The members of a wedding party have approached Imperial Jewelers about buying 14 of these gold bracelets for the discounted price of $367.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $4. Imperial Jewelers would also have to buy a special tool for $462 to apply the filigree to the bracelets. 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, $5.00 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?
Expert Answer:
Answer rating: 100% (QA)
Reject accept Net income Increase Decrease Revenue 367 x 14051385138 Cost Direct materials ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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