imperial jewelers manufactures and sells a gold bracelet for $189.95. the companys accounting system says…

imperial jewelers manufactures and sells a gold bracelet for $189.95. the companys accounting system says the unit product cost for this bracelet is $149.00, as shown below: direct materials $84.00 direct labor 45.00 manufacturing overhead 20.00 unit product cost $149.00 a wedding party has approached imperial jewelers about buying 20 gold bracelets for the discounted price of $169.95 each. the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $2.00. imperial jewelers would have to buy a special tool for $250 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, $4.00 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 partys order using existing manufacturing capacity. required: 1. what is the financial advantage (disadvantage) of accepting the wedding partys special order? 2. should the company accept the special order? complete this question by entering your answers in the tabs below.

imperial jewelers manufactures and sells a gold bracelet for $189.95. the companys accounting system says the unit product cost for this bracelet is $149.00, as shown below: direct materials $84.00 direct labor 45.00 manufacturing overhead 20.00 unit product cost $149.00 a wedding party has approached imperial jewelers about buying 20 gold bracelets for the discounted price of $169.95 each. the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $2.00. imperial jewelers would have to buy a special tool for $250 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, $4.00 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 partys order using existing manufacturing capacity. required: 1. what is the financial advantage (disadvantage) of accepting the wedding partys special order? 2. should the company accept the special order? complete this question by entering your answers in the tabs below.

Answer

Explanation:

Step1: Calculate the variable cost per unit for the special - order

The original variable costs per unit are direct materials ($84.00), direct labor ($45.00), and variable manufacturing overhead ($4.00). The special - order requires an additional $2.00 of direct materials per unit. The variable cost per unit for the special - order, $VC = 84 + 45+4 + 2=$135$

Step2: Calculate the total revenue from the special - order

The wedding party is buying 20 bracelets at a price of $169.95 per bracelet. The total revenue, $TR=169.95\times20 = $3399$

Step3: Calculate the total variable cost for the special - order

The variable cost per unit is $135, and the number of units is 20. The total variable cost, $TVC = 135\times20=$2700$

Step4: Calculate the cost of the special tool

The cost of the special tool is $250.

Step5: Calculate the financial advantage (disadvantage)

The financial advantage (disadvantage) is calculated as $TR-(TVC +$ cost of special tool$)$. $FA=3399-(2700 + 250)=3399 - 2950=$449$

Answer:

  1. The financial advantage of accepting the wedding party's special order is $449.
  2. Yes, the company should accept the special order.