Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Imperial Jewelers manufactures and sells a gold bracelet for $405.00. The companys accounting system says that the unit product cost for this bracelet is $258.00

Imperial Jewelers manufactures and sells a gold bracelet for $405.00. The companys accounting system says that the unit product cost for this bracelet is $258.00 as shown below:

Direct materials $ 141
Direct labor 81
Manufacturing overhead 36
Unit product cost $ 258

The members of a wedding party have approached Imperial Jewelers about buying 17 of these gold bracelets for the discounted price of $365.00 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 $5. 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, $6.00 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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And GRC Automation In SAP

Authors: Maxim Chuprunov

1st Edition

3642353010, 9783642353017

More Books

Students also viewed these Accounting questions