Reference no: EM132011041

Question - Custom Metal Works received an offer from big-box retail company to purchase 3,000 metal outdoor tables for $220 each.

Custom Metal Works accountants determined that the following cost apply to the tables:

Direct Material $125

Direct labor 50

Manufacturing overhead 70

Total $245

Of the $70 of overhead, $14 is variable and $56 relates to fixed cost. The $56 of fixed overhead is allocated as $1.12 per direct labor dollar.

Question A) What will be the real effect on profit if the order is accepted?

Question B) Explain why managers who focus on reported cost per unit may be inclined to turn down the order.