EXERCISE 6-9. Problems Associated with Cost Allocation High Country Outerwear received an offer from a motorcycle company to purchase 1 ,000 waterproof riding suits for $175 each. High Country's accountants determine that the following costs apply to the production of a riding suit:

Direct material Direct labor Manufacturing overhead Total 80 40 62

$182 Of the $62 of overhead, $10 is variable and $52 relates to fixed costs. The $52 of fixed overhead is allocated as $1.30 per direct labor dollar.

Required

a. What will be the 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.