Quality Pretzels Inc., makes chocolate covered pretzels and other snacks in its Waco plant. Its products are sold in five-pound metal containers, which are also manufactured at the Waco plant. In June 2014, the plant manager, Sarah Cassidy, was approached by Texas Canister Company with an offer to supply the canisters at a price of $1.00 each. Quality Pretzels assigns the following direct costs to canister production corresponding to a volume of 760,000 canisters:

Both these direct costs are considered variable. The company assigns variable overhead at $10 per direct labor hour and fixed manufacturing overhead at $45 per direct labor hour. Cassidy views this decision as a "long term" decision because she expects that her fixed costs will decrease should she decide to accept the offer from Texas Canister Company. Assume that cost is the only consideration in her decision making process (i.e., dimensions such as quality and delivery reliability are not relevant).

(A) Based on the direct labor-based product costing system in place, would Cassidy be inclined to accept the order? by how is the fixed overhead expected to decrease if Sarah decides to accept Texas Canister Company's offer? Show your computations.

(B) Never a fan of the direct-labor based system, Cassidy performs her own analysis and determines that only $80,000 of supervisor salaries and $28,000 of machinery depreciation can be avoided from the fixed manufacturing overhead if she buys the canisters from Texas Canister Company. Based on this information, would Cassidy be inclined to accept the order? Show your computations.

(C) Meanwhile, the controller of Quality Pretzels, Dave Paxon, had performed an activity-based costing analysis of Quality's overall cost structure. His analysis is captured in the following exhibit:

(0) Meanwhile, the controller of Quality Pretzels, Dave Paxon, had performed an activity-based costing analysis of Quality's overall cost structure. His analysis is captured in the following exhibit: _ _ Annual Budgeted Actlwty cost pool cost Facility level Plant depreciation $1,650,000 Product-sustaining level Product development 300,000 Supervisory salaries 600,000 Batch level Material handling 800,000 Purchasing 250,000 Inspection 300,000 Setup 400,000 Unit level Electricity 700,000 Oil and lubrication 120,000 Equipment maintenance 180,000 Machine ry depreciation 200,000 Total overhead $5,500,000 Cost driver Product specs Supervisory hours Material-handling hours #of Purchase orders #of inspections #cf setups #cf machine hours #of machine hours #of machine hours #of machine hours Budgeted levels of cost driver unit for the current year (2014) 500 15,000 80,000 800 800 800 450,000 450,000 450,000 450,000 Capacity in cost driver units 500 15,000 100, 000 1, 000 1, 000 1, 000 500,000 500,000 500,000 500,000 Dave provides data both on capacity and on budgeted volume for 2014. Assume now that Sarah consults Dave about the decision