Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Imperial Jewellers is considering a special order for 20 handcrafted gold bracelets for a wedding
Imperial Jewellers is considering a special order for 20 handcrafted gold bracelets for a wedding. The gold bracelets are to be given as gifts to members of the wedding party. The normal selling price of a gold bracelet is $190.00 and its unit product cost is $166.50, as shown:
Materials$84.50Direct labour 44.00Manufacturing overhead 38.00Unit product cost$166.50
The manufacturing overhead is largely fixed and unaffected by variations in how much jewellery is produced in any given period. However, 20% of the overhead is variable with respect to the number of bracelets produced. The customer interested in the special bracelet order would like special filigree applied to the bracelets. This would require additional materials costing $5.00 per bracelet and would also require acquisition of a special tool costing $340 that would have no other use once the special order was 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.
What effect would accepting this order have on the company's net operating income if a special price of $171.00 is offered per bracelet for this order?
Expert Solution
| Computation of Incremetal Net Operating Income: | ||
| Per unit | Total | |
| for 20 | ||
| Bracelets | ||
| Incremental revenue | $171 | $3,420 |
| Incremental Costs : | ||
| Variable Costs: | ||
| Direct materials | $84.50 | $1,690 |
| Direct labor | $44 | $880 |
| Variable manufacturing overhead | $7.60 | $152 |
| ( $38*20% ) | ||
| Special filigree | $5 | $100 |
| Total Variable Costs | $141.10 | $2,822.00 |
| Fixed Costs | ||
| Purchase of Special tool | $340 | |
| Total Incremental Cost | $3,162 | |
| Incremental net Opearating income (loss) | $258 | |
| Net Operating Income Increases by 258 | ||
| Special Order should be Accepted | ||
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
