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Imperial Jewelers manufactures and sells a gold bracelet for $403

Accounting Aug 11, 2020

Imperial Jewelers manufactures and sells a gold bracelet for $403.00. The company's accounting system says that the unit product cost for this bracelet is $264.00 as shown below: Help Save & Ent $144 Direct materials Direct labor Manufacturing overhead Unit product cost 83 37 $264 The members of a wedding party have approached Imperial Jewelers about buying 14 of these gold bracelets for the discounted price of $363.00 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 $459 and that would increase the direct materials cost per bracelet by $6. 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, $7.00 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? 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? Required Required 2 >

Expert Solution

1)

Calculation for financial advantage or disadvantage of accepting the special order

Expected Revenue [ $ 363 X 14 ]   $5,082
Expected cost :    
Direct material cost [ $ 150 X 14] $2,100  
Direct labor cost [$ 83 X 14 ] $1,162  
Variable manufacturing overhead [ $ 7 X 14 ] $ 98  
Cost of special tool $ 459  
Less: Total cost   $3,819
Financial advantage   $1,263

2) Yes ,The company should accept the special order .

As, the acceptance of this special order ,will not affect the production of outputs to other customers and have a financial advantage ,then it is recommended to accept that special order.

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