Direct material $ 100
Direct labor 45
Manufacturing overhead 70
Total $ 215
Of the $ 70 of overhead, $ 14 is variable and $ 56 relates to fixed costs. The $ 56 of fixed overhead is allocated as $ 1.25 per direct labor dollar.
A. What will be the real effect on profit if the order is accepted?
B. Explain why managers who focus on reported cost per unit may be inclined to turn down the order.
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