Imperial Jewelers is considering a special order for 28 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $402.00 and its un

Accepting this special order would result in a decrease in the company's net operating income. To calculate the effect, the contribution margin per unit needs to be calculated first. The contribution margin per unit is the selling price per unit minus the variable costs per unit. In this case, the variable costs per unit are the direct materials, direct labor, variable portion of manufacturing overhead, and additional materials for filigree, which total to $299 ($145 + $88 + $35 + $11 + $10). Therefore, the contribution margin per unit is $63 ($362 - $299). The total contribution margin for the special order would then be $1,764 ($63 x 28). However, the acquisition of the special tool would be a sunk cost and not applicable to the calculation of net income. The additional fixed overhead would also not change, so the only relevant cost is the additional variable cost for the materials needed for the filigree, which is $280 ($10 x 28). Subtracting the additional variable cost from the total contribution margin gives a net income of $1,484 ($1,764 - $280). Therefore, accepting this special order would result in a decrease in net operating income of $308 ($1,484 - $1,792), which is calculated by subtracting the total product cost of fulfilling the order ($7,504 = $268 x 28) from the total revenue of the special order ($10,136 = $362 x 28).