Please use the following information for problems 1 and 2:

Cost per unit of tables:

Direct materials $50

Direct labor (all variable) 40

Variable manufacturing overhead 10

Fixed manufacturing overhead 8

Variable marketing costs 7

Fixed marketing costs 5

___

Total cost per unit $120

The Smith Company normally sells these tables for $150 each. The company has just received a special order from a customer for 200 tables, but the customer only wants to pay $110 per table. Because the tables would have a different design than the tables the Smith Company normally sells, the company will need to buy a special tool to make the tables, and this tool will be discarded after the 200 tables are made. No marketing costs will be incurred for this order, and the company has enough spare capacity to accept this order and still satisfy all of its other customers.

If the special tool costs $800, how much will the Smith Companys profit increase or decrease if it accepts the order and sells the 200 tables to this customer for $110 each? Should it accept the order in this case?

If the special tool costs $2,800, how much will the Smith Companys profit increase or decrease if it accepts the order and sells the 200 tables to this customer for $110 each? Should it accept the order in this case?