Imperial Jewelers manufactures and sells a gold bracelet for $409.00. The company's accounting system says that the unit product cost for this bracelet is $273.00 as shown below: Dir'ect materials $ 144 Direct labor" 89 Manufacturing overhead 46 Unit product cost 5 273 "he members of a wedding party have approached Imperial Jewelers about buying 17 of these gold bracelets for the discounted price of $369.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $7. Imperial Jewelers would also have to buy a special tool for $458 to apply the ligree to the bracelets. "he special tool would have no other use once the special order is completed. "o 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, $8.00 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 selljewelry to other customers. :urthermore, the company could fulll the wedding party's order using its existing manufacturing capacity. Required: 'I. What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order? \"In my opinion, we oughtto stop making our own drums and accept that outside supplier's offer,\" said Wim Niewindt. managing director of Antilles Refining, N.V._. of Aruba. \"At a price of $21 per drum, we would be paying $4.70 less than it costs us to manufacture the drums in our own plant. Since we use 70,000 drums a year, that would be an annual cost savings of $329,000." Antilles Refining's current cost to manufacture one drum is given below (based on 70000 drums per year): Direct materials $ 13.59 Direct labor ?.59 Variable overhead 1.59 Fixed overhead {$3.16 general company overhead, $1.90 depreciation, and $1.28 supervision) 6.29 Total cost per drum 55 25-79 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $252,000 per year. Alternative 2: Purchase the drums from an outside supplier at $21 per drum. The new equipment would be more efcient than the equipment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labor and variable overhead costs by 30%. The old equipment has no resale value. Supervision cost {$84,000 per year) and direct materials cost per drum would not b affect d by th ncw cquipm nt. The new equipments capacity would be 105.000 drums per year. The company's total general company overhead would be unaffected by this decision. Required: 1. Assuming that 70,000 drums are needed each year, what is the financial advantage {disadvantage} of buying the drums from an outside supplier? 2. Assuming that 80,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 3. Assuming that 105,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of106,800 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expense Fixed selling and administrative expense HIM m m p H G e N Vim m m o Vim m m tn'bQ'bQ'bQ'bQ'bq The normal selling price is $25.00 per unit. The company's capacity is 118,800 units per year An order has been received from a mail order house for 1,000 units at a special price of $22.00 per unit. This order would not affect regular sales or the company's total xed 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 company's inventory includes 1,000 units ofthis 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 affect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for the inferior units? Han Products manufactures 26,000 units of part 86 each yearfor use on its production line. At this level ofactivitv, the cost per unit for part 86 is: Direct materials $ 1.66 Direct labor 9.66 Variable manufacturing overhead 2.66 Fixed manufacturing overhead 9.66 Total cost per part $ 24-99 An outside supplier has offered to sell 26.000 units of part 86 each year to Han Products for $20 per part. If Han Products accepts this offer. the facilities now being used to manufacture part 86 could be rented to another company at an annual rental of $76000. However. Han Products has determined that twothirds of the fixed manufacturing overhead being applied to part 86 would continue even if part 86 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) ofaccepting the outside supplier's offer