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24 March, 03:31

Imperial jewelers manufactures and sells a gold bracelet for $189.95. the company's accounting system says that the unit product cost for this bracelet is $149.00 as shown below:

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  1. 24 March, 05:52
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    Total Marginal Cost of each bracelet is:

    Direct materials. $84.00

    Add: Direct labor $45.00

    Add: Variable Portion. $4.00

    Add: Additional Filigree

    Materials. $2.00

    Total. $135.00 per bracelet

    Sales Price - Marginal Cost = $169.95 - $135.00 = $34.95 per bracelet

    Total price of 20 bracelet = $18.95 * 20

    = $699.00

    Total Operating Income before accounting for the special tool that cost, $250.00

    = $699.00 - $250.00

    Total operating income = $449.00

    Note that the remaining fixed maintenance overhead ($16) was not subtracted because manufacturing costs represent only the expenses necessary to make the product unlike production cost.
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