Cane Company manufactures two products called Alpha and Betathat sell for $120 and $80, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 100,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
Alpha Beta Direct materials $ 30 $ 12 Direct labor 20 15 Variable manufacturing overhead 7 5 Traceable fixed manufacturing overhead 16 18 Variable selling expenses 12 8 Common fixed expenses 15 10 Total cost per unit $ 100 $ 68
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.
1. Assume that Cane expects to produce and sell 90,000 Betasduring the current year. One of Cane
Cane Company manufactures two products called Alpha and Betathat sell for $120 and $80, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 100,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
| Alpha | Beta | |||||||
| Direct materials | $ | 30 | $ | 12 | ||||
| Direct labor | 20 | 15 | ||||||
| Variable manufacturing overhead | 7 | 5 | ||||||
| Traceable fixed manufacturing overhead | 16 | 18 | ||||||
| Variable selling expenses | 12 | 8 | ||||||
| Common fixed expenses | 15 | 10 | ||||||
| Total cost per unit | $ | 100 | $ | 68 | ||||
| The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars. 1. Assume that Cane expects to produce and sell 90,000 Betasduring the current year. One of Cane |
Related questions
Cane Company manufactures two products called Alpha and Betathat sell for $120 and $80, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 100,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
| Alpha | Beta | |||||||
| Direct materials | $ | 30 | $ | 12 | ||||
| Direct labor | 20 | 15 | ||||||
| Variable manufacturing overhead | 7 | 5 | ||||||
| Traceable fixed manufacturing overhead | 16 | 18 | ||||||
| Variable selling expenses | 12 | 8 | ||||||
| Common fixed expenses | 15 | 10 | ||||||
| Total cost per unit | $ | 100 | $ | 68 | ||||
| The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars 1. Assume that Cane expects to produce and sell 90,000 Betasduring the current year. One of Cane |
Stuck On these problems:
Cane Company manufactures two products called Alpha and Betathat sell for $120 and $80, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 100,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
| Alpha | Beta | |||||||
| Direct materials | $ | 30 | $ | 12 | ||||
| Direct labor | 20 | 15 | ||||||
| Variable manufacturing overhead | 7 | 5 | ||||||
| Traceable fixed manufacturing overhead | 16 | 18 | ||||||
| Variable selling expenses | 12 | 8 | ||||||
| Common fixed expenses | 15 | 10 | ||||||
| Total cost per unit | $ | 100 | $ | 68 | ||||
| The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars. 1. What contribution margin per pound of raw material is earnedby Alpha and Beta? 2. Assume that Cane |
Cane Company manufactures two products called Alpha and Betathat sell for $215 and $160, respectively. Each product uses onlyone type of raw material that costs $7 per pound. The company hasthe capacity to annually produce 125,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
ALPHA BETA
Direct materials | $ | 42 | $ | 21 | ||||
| Direct labor | 35 | 28 | ||||||
| Variable manufacturing overhead | 23 | 21 | ||||||
| Traceable fixed manufacturing overhead | 31 | 34 | ||||||
| Variable selling expenses | 28 | 24 | ||||||
| Common fixed expenses | 31 | 26 | ||||||
| Total cost per unit | $ | 190 | $ | 154 |
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.
1. Assume that Cane normally produces and sells 76,000 Betas and96,000 Alphas per year. If Cane discontinues the Beta product line,its sales representatives could increase sales of Alpha by 16,000units. If Cane discontinues the Beta product line, how much wouldprofits increase or decrease?
Profit ___ Increase/decrease? by ______?
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