Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says the unit product cost for this bracelet is $270.00, as shown below: Direct materials. Direct labor Manufacturing overhead Unit product cost $ 150 84 36 $ 270 A wedding party has approached Imperial Jewelers about buying 25 gold bracelets for the discounted price of $362.00 each. The wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $5. Imperial Jewelers would have to buy a special tool for $458 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order, Imperial Jewelers determined 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 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 party's order using existing manufacturing capacity. Required: 1. What is the financial advantage (disadvantage) of accepting the wedding party's special order? 2. Should the company accept the special order?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says the unit
product cost for this bracelet is $270.00, as shown below:
Direct materials
Direct labor
Manufacturing overhead
Unit product cost
$ 150
84
36
$ 270
A wedding party has approached Imperial Jewelers about buying 25 gold bracelets for the discounted price of $362.00
each. The wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per
bracelet by $5. Imperial Jewelers would have to buy a special tool for $458 to apply the filigree to the bracelets. The
special tool would have no other use once the special order is completed.
To analyze this special order, Imperial Jewelers determined 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 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 party's order using existing
manufacturing capacity.
Required:
1. What is the financial advantage (disadvantage) of accepting the wedding party's special order?
2. Should the company accept the special order?
Transcribed Image Text:Imperial Jewelers manufactures and sells a gold bracelet for $402.00. The company's accounting system says the unit product cost for this bracelet is $270.00, as shown below: Direct materials Direct labor Manufacturing overhead Unit product cost $ 150 84 36 $ 270 A wedding party has approached Imperial Jewelers about buying 25 gold bracelets for the discounted price of $362.00 each. The wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $5. Imperial Jewelers would have to buy a special tool for $458 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order, Imperial Jewelers determined 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 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 party's order using existing manufacturing capacity. Required: 1. What is the financial advantage (disadvantage) of accepting the wedding party's special order? 2. Should the company accept the special order?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education