Imperial jewelers is considering a special order for 20

Imperial Jewelers is considering a special order for 16 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $403.00 and its unit product cost is $266.00 as shown below:

Direct materials

$

149

Direct labor

80

Manufacturing overhead

37

Unit product cost

$

266

Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $9 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $8 per bracelet and would also require acquisition of a special tool costing $460 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 without affecting any other order.

Required:

What effect would accepting this order have on the company’s net operating income if a special price of $363.00 per bracelet is offered for this order? (Enter all amounts as positive values.)

Per Total 16

Unit bracelets

Incremental revenue _______________ _______________

Incremental costs:

Variable costs:

Direct materials _______________ ________________

Direct labor _______________ ________________

Variable manufacture overhead _______________ ________________

Special filigree _______________ _________________

Total variable costs _______________ _________________

Fixed costs:

Purchase of special tool _________________

Total incremental cost _____________________

Incremental net operating income (loss) _____________________

Should the special order be accepted at this price?

No

Yes

(3) Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:

Product

A

B

C

Selling price

$

240

$

360

$

320

Variable expenses:

Direct material

24

72

32

Other variable expenses

120

108

176

Total variable expenses

144

180

208

Contribution margin

$

96

$

180

$

112

Contribution margin ratio

40

%

50

%

35

%

The same raw material is used in all three products. Barlow Company has only 4,400 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier’s plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound.

Required:

1.

Compute the amount of contribution margin that will be obtained per pound of material used in each product.

A B C

Contribution margin per unit

Direct material cost per unit

Pound of material required per unit

Contribution margin per pound

2a.

Compute the amount of contribution margin on each product.

A B C

Contribution margin per pound

Pounds of material available

Total contribution margin

2b.

Which orders would you recommend that the company work on next week—the orders for product A, product B, or product C?

Product A

Product B

Product C

3.

A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be willing to pay for an additional pound of materials?

Maximum amount $____________ per pound

Garrison 15e Recheck 2015-01-02

M

(1)The Hartford Symphony Guild is planning its annual dinner-dance. The dinner-dance committee has assembled the following expected costs for the event:

Dinner (per person)

$15

Favors and program (per person)

$7

Band

$2,000

Rental of ballroom

$1,250

Professional entertainment during intermission

$2,000

Tickets and advertising

$600

The committee members would like to charge $61 per person for the evening’s activities.

Required:

1.

Compute the break-even point for the dinner-dance (in terms of the number of persons who must attend).

2.

Assume that last year only 250 persons attended the dinner-dance. If the same number attend this year, what price per ticket must be charged in order to break even? (Round your answer to 2 decimal places.)

Refer to the original data ($61 ticket price per person). Prepare a CVP graph for the dinner-dance from zero tickets up to 500 tickets sold. (Use the line tool to draw three single lines (Total Sales Revenue, Fixed Expenses, Total Expenses). Each line should only contain the two endpoints. For the CVP Graph to grade correctly, you must enter the exact coordinates of each endpoint. Once all points have been plotted, click on the line (not individual points) and a tool icon will pop up. You can use this to enter exact co-ordinates for your points as needed. To remove a line/point from the graph, click on the line/point and select delete option.)

Y axis represents total sales in dollars point begin at 0, 3000, 6000, 9000, 120000, 150000, 18000 …..33000

X axis represent number of persons point begins at 0, 100, 200, 300, 400, 500,600

100

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