Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 30,000 additional Alphas for a price of $160 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 14,000 units.
Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 30,000 additional Alphas for a price of $160 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 14,000 units.
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. |
3. Assume that Cane expects to produce and sell 80,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer that is willing to buy 10,000 additionalAlphas for a price of $80 per unit. If Cane accepts the customerâsoffer, how much will its profits increase or decrease? |
| 4. Assume that Cane expects to produce and sell 90,000 Betasduring the current year. One of Caneâs sales representatives hasfound a new customer that is willing to buy 5,000 additional Betasfor a price of $39 per unit. If Cane accepts the customerâs offer,how much will its profits increase or decrease?
|
Cane Company manufactures two products called Alpha and Betathat sell for $185 and $120, respectively. Each product uses onlyone type of raw material that costs $5 per pound. The company hasthe capacity to annually produce 112,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow: |
| Alpha | Beta | |||||||
| Direct materials | $ | 30 | $ | 10 | ||||
| Direct labor | 22 | 29 | ||||||
| Variable manufacturing overhead | 20 | 13 | ||||||
| Traceable fixed manufacturing overhead | 24 | 26 | ||||||
| Variable selling expenses | 20 | 16 | ||||||
| Common fixed expenses | 23 | 18 | ||||||
| Total cost per unit | $ | 139 | $ | 112 | ||||
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.
value:
10.00 points
Required information
| Required: |
| 1. | What is the total amount of traceable fixed manufacturingoverhead for the Alpha product line and for the Beta productline?
| ||||||||||||||||||||||||||||||||||
Cane Company manufactures two products called Alpha and Betathat sell for $225 and $175, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 130,000 units of each product. Itsaverage cost per unit for each product at this level of activityare given below:
| Alpha | Beta | |||||||
| Directmaterials | $ | 42 | $ | 24 | ||||
| Direct labor | 42 | 32 | ||||||
| Variable manufacturingoverhead | 26 | 24 | ||||||
| Traceable fixed manufacturingoverhead | 34 | 37 | ||||||
| Variable selling expenses | 31 | 27 | ||||||
| Common fixed expenses | 34 | 29 | ||||||
| Total cost per unit | $ | 209 | $ | 173 | ||||
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are unavoidableand have been allocated to products based on sales dollars.
1. What is the total amount of traceable fixed manufacturingoverhead for each of the two products, Alpha and Beta? and What isthe companyâs total amount of common fixed expenses?
2. Assume that Cane expects to produce and sell 99,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer who is willing to buy 29,000 additional Alphasfor a price of $156 per unit. What is the financial advantage(disadvantage) of accepting the new customer's order?
3. Assume that Cane expects to produce and sell 109,000 Betasduring the current year. One of Caneâs sales representatives hasfound a new customer who is willing to buy 5,000 additional Betasfor a price of $82 per unit. What is the financial advantage(disadvantage) of accepting the new customer's order?
4. Assume that Cane expects to produce and sell 114,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer who is willing to buy 29,000 additional Alphasfor a price of $156 per unit; however pursuing this opportunitywill decrease Alpha sales to regular customers by 13,000 units.What is the financial advantage (disadvantage) of accepting the newcustomerâs order?
