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Special Order Decision (LO11-4) Ches Imperial Jewelers manufactures and sells a gold bracelet for $409

Accounting Dec 02, 2020

Special Order Decision (LO11-4) Ches Imperial Jewelers manufactures and sells a gold bracelet for $409.00. The company's accounting system says that the unit product cost for this bracelet is $259.00 as shown below. Direct materials Direct labor Manufacturing overhead Unit product cost $143 83 33 3259 The members of a wedding party have approached Imperial Jewelers about buying 23 of these gold bracelets for the discounted price of $369.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $461 and that would increase the direct materials cost per bracelet by $9. 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, $10.00 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 (disabitage) of accepting the special order from the wedding party? 2. Should the company accept the spect order? 5 Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party?

Expert Solution

         
Req 1 Particulars Per Unit Total 23 Bracelets  
  Incremental Revenue         369.00            8,487  
  Incremental Cost:      
  Variable Cost:      
  Direct material         143.00      3,289.00  
  Direct labor           83.00      1,909.00  
  Variable manufacturing overhead           10.00          230.00  
  Special filigree              9.00          207.00  
  Total Variable cost         245.00      5,635.00  
  Fixed Cost:      
       Purchase of special tool            461.00  
  Total Incremental cost        6,096.00  
  Incremental net operating income/(Loss)        2,391.00
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