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Question - Laramie Metal Works received an offer from a big-box retail company to purchase 3,000 metal outdoor tables for $216 each. Laramie Metal Works accountants determine that the following costs apply to the tables:
Direct material $130 Direct labor 50 Manufacturing overhead 70 Total $250
Of the $70 of overhead, $14 is variable and $56 relates to fixed costs. The $56 of fixed overhead is allocated as $1.10 per direct labor dollar.
Required - What will be the real effect on profit if the order is accepted?
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