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 companys regular sales and the order could be fulfilled using the companys existing capacity without affecting any other order.

Required:

1.

What effect would accepting this order have on the companys net operating income if a special price of $169.95 per bracelet is offered for this order? (Enter all amounts as positive values. Round your answers to 2 decimal places.)

	Per Unit	Total for 20 Bracelets
Incremental revenue
Incremental costs:
Variable costs:
Direct materials
Direct labor
Variable manufacturing overhead
Special filigree
Total variable cost	$0.00	0.00
Fixed costs:
Purchase of special tool
Total incremental cost		0.00
Incremental net operating income (loss)		$0.00

2.

Should the special order be accepted at this price?

	Yes
	No