Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Imperial Jewellers is considering a special order for 30 handcrafted gold bracelets for a major upscale wedding. The gold bracelets are to be given as

Imperial Jewellers is considering a special order for 30 handcrafted gold bracelets for a major upscale wedding. The gold bracelets are to be given as gifts to members of the wedding party. The normal selling price of a gold bracelet is $195.00 and its unit product cost is $161.50, as shown:

Materials $ 89.50
Direct labour 49.00
Manufacturing overhead 23.00
Unit product cost $ 161.50

The manufacturing overhead is largely fixed and unaffected by variations in how much jewellery is produced in any given period. However, $11.50 of the overhead is variable with respect to the number of bracelets produced. The customer interested in the special bracelet order would like special filigree applied to the bracelets. This would require additional materials costing $10.00 per bracelet and would also require acquisition of a special tool costing $440 that would have no other use once the special order was 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.

What effect would accepting this order have on the companys net operating income if a special price of $192.00 is offered per bracelet for this order?

Net operating income increases by ________?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Accounting questions