Exercise 10-4 Evaluating a Special Order [LO4]

Miyamoto Jewelers is considering a special order for 23 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $408 and its unit product cost is $272 as shown below:

Direct materials	$	145
Direct labor		89
Manufacturing overhead		38
Unit product cost	$	272

Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $11 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 $10 per bracelet and would also require acquisition of a special tool costing $459 that would have no other use once the special order is completed. This order would have no effect on the company