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Clarification of Managerial Accounting

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A. 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 the unit product cost is as
Direct materials $ 84.00
Direct labor 45.00
Manufacturing overhead 20.00
Total 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.

The customer would also like a special filigree applied to the bracelets.
This filigree would require additional materials costing $2 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 company's regular sales and the order could be fulfilled using
the company's existing capacity.

What effect would accepting this order have on the company's net operating
profit if a special price of $169.95 per bracelet is offered for this order?
Should the special order be accepted at this price?

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Solution Summary

Word and Excel documents show the effects of an order on a company's net operating profits and more.