Imperial Jewelers is
considering a special order for 22 handcrafted gold bracelets to be given as
gifts to members of a wedding party. The normal selling price of a gold
bracelet is $410.00 and its unit product cost is $270.00 as shown below:
Direct materials $147
Direct labor 88
Manufacturing
overhead 35
Unit product cost
$270
Most of the
manufacturing overhead is fixed and unaffected by variations in how much
jewelry is produced in any given period. However, $8 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 $7 per
bracelet and would also require acquisition of a special tool costing $458 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:
What effect would
accepting this order have on the company’s net operating income if a special
price of $370.00 per bracelet is offered for this order? (Enter all amounts as
positive values.)
Per
|
Total
| |
Unit
|
22 bracelets
| |
Incremental revenue
|
$370
|
$8,140
|
Incremental costs:
|
