EXERCISE 12-4 Evaluating a Special Order [L012-4] Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $189.95 and its unit product cost is $149.00 as shown below: Tabor ....... Direct materials Direct labor Manufacturing overhead ... Unit product cost ....... $ 84.00 45.00 20.00 $149.00 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 filigree applied to the bracelets. This filigree would require additional materials cost- ing $2.00 per bracelet and would also require acquisition of a special tool costing $250 that would have no other use once the special order is completed. This order would have no effect on the com- pany's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order. Required: What effect would accepting this order have on the company's net operating income if a special price of $169.95 per bracelet is offered for this order? Should the special order be accepted at this price?
Related questions
| Imperial Jewelers is considering a special order for 13 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $405.00 and its unit product cost is $275.00 as shown below: |
| Direct materials | $ | 149 | |
| Direct labor | 88 | ||
| Manufacturing overhead | 38 | ||
| Unit product cost | $ | 275 | |
| Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $5 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 filigree applied to the bracelets. This filigree would require additional materials costing $4 per bracelet and would also require acquisition of a special tool costing $468 that would have no other use once the special order is completed. This order would have no effect on the companyâs regular sales and the order could be fulfilled using the companyâs existing capacity without affecting any other order. |
| Required: |
| What effect would accepting this order have on the companyâs net operating income if a special price of $365.00 per bracelet is offered for this order? |
28.
Imperial Jewelers is considering a special order for 22handcrafted gold bracelets to be given as gifts to members of awedding party. The normal selling price of a gold bracelet is$403.00 and its unit product cost is $266.00 as shown below:
| Direct materials | $ | 142 | |
| Direct labor | 89 | ||
| Manufacturing overhead | 35 | ||
| Unitproduct cost | $ | 266 | |
Most of the manufacturing overhead is fixed and unaffected byvariations in how much jewelry is produced in any given period.However, $6 of the overhead is variable with respect tothe number of bracelets produced. The customer who is interested inthe special bracelet order would like special filigree applied tothe bracelets. This filigree would require additional materialscosting $5 per bracelet and would also require acquisition of aspecial tool costing $462 that would have no other use once thespecial order is completed. This order would have no effect on thecompanyâs regular sales and the order could be fulfilled using thecompanyâs existing capacity without affecting any other order. |
| Required: |
| 1. | What effect would accepting this order have on the companyâs netoperating income if a special price of $363.00 per bracelet isoffered for this order? (Enter all amounts as positivevalues.) PerUnit Total 22 Bracelets Incremental Revenue Variable Costs: Direct Materials Direct Labor Variable Manu. Overhead Special Filigree Fixed Costs: Purchash of Special Tool |
