Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of 84,000 units per year is:

Direct materials	$	2.50
Direct labor	$	2.00
Variable manufacturing overhead	$	0.90
Fixed manufacturing overhead	$	4.45
Variable selling and administrative expenses	$	1.40
Fixed selling and administrative expenses	$	1.00

The normal selling price is $18.00 per unit. The companys capacity is 98,400 units per year. An order has been received from a mail-order house for 1,200 units at a special price of $15.00 per unit. This order would not affect regular sales or the companys total fixed costs.

Required:

1. What is the financial advantage (disadvantage) of accepting the special order?

2. As a separate matter from the special order, assume the companys inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units?

Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The companys accounting system says that the unit product cost for this bracelet is $262.00 as shown below:

Direct materials	$	148
Direct labor		83
Manufacturing overhead		31
Unit product cost	$	262

The members of a wedding party have approached Imperial Jewelers about buying 29 of these gold bracelets for the discounted price of $362.00 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 $469 and that would increase the direct materials cost per bracelet by $13. 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, $14.00 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 partys 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?