1 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: Direct materials $84.00 Direct labor 45.00 Manufacturing overhead 20.00 Unit product cost $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 costing $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 company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order. Required: (a) What effect would accepting this order have on the company's net operating income if a special price of $169.95 per bracelet is offered for this order? (Input the amount as positive value. Omit the "$" sign in your response.) Net operating income increased by $ ? (b) Should the special order be accepted at this price? Yes or No? Question 2 Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow: Product A B C Selling price $ 180 $ 270 $ 240 Variable expenses: Direct materials 24 72 32 Other variable expenses 102 90 148 Total variable Expense 126 162 180 Contribution margin $ 54 $ 108 $ 60 Contribution margin ratio 30% 40% 25% The same raw material is used in all three products. Barlow Company has only 5,000 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound. Requirement 1: Compute the amount of contribution margin that will be obtained per pound of material used in each product. (Omit the "$" sign in your response.) A B C Contribution margin $ ? $ ? $ ? Requirement 2: A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be willing to pay for an additional pound of materials? (Omit the "$" sign in your response.) The upper limit of raw materials for product A $ ? The upper limit of raw materials for product B $ ? The upper limit of raw materials for product C $ ? Question 3 Bill has just returned from a duck hunting trip. He has brought home eight ducks. Bills friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John has presented him with the following cost estimate per duck: Camper and equipment: Cost, $12,000; usable for eight seasons; 10 hunting trips per season $150 Travel expense (pickup truck): 100 miles at $0.31 per mile (gas, oil, and tires$0.21 per mile; depreciation and insurance$0.10 per mile) 31 Shotgun shells (two boxes) 20 Boat: Cost, $2,320, usable for eight seasons; 10 hunting trips per season 29 Hunting license: Cost, $30 for the season; 10 hunting trips per season 3 Money lost playing poker: Loss, $24 (Bill plays poker every weekend) 24 Bottle of whiskey: Cost, $15 (used to ward off the cold) 15 Total cost $272 Cost per duck ($272 8 ducks) $34 Requirement 1: Assuming that the duck hunting trip Bill has just completed is typical, calculate the total cost which is relevant to a decision as to whether Bill should go duck hunting again this season? (Omit the "$" sign in your response.) Total cost $ ? Requirement 2: Suppose that Bill gets lucky on his next hunting trip and shoots 10 ducks in the amount of time it took him to shoot 8 ducks on his last trip. How much would it have cost him to shoot the last two ducks? (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) Cost of third duck $ ? Question 4 Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, consideration is being given to dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (175 seats 40% occupancy $200 ticket price) $14,000 100.0 % Variable expenses ($15 per person) 1,050 7.5 Contribution margin 12,950 92.5 % Flight expenses: Salaries, flight crew 1,800 Flight promotion 750 Depreciation of aircraft 1,550 Fuel for aircraft 5,800 Liability insurance 4,200 Salaries, flight assistants 1,500 Baggage loading and flight preparation 1,700 Overnight costs for flight crew and assistants at destination 300 Total flight expenses 17,600 Net operating loss $(4,650) The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company, the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482. c. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses. d. If flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another flight. e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. f. Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll. Required: By how much will the profits increase or decrease if flight 482 is discontinued? (Input the amount as positive value. Omit the "$" sign in your response.) Profits would decrease by $