1. Assume that Cane expects to produce and sell 109,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 24,000 additional Alphas for a price of $136 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 11,000 units. What is the financial advantage (disadvantage) of accepting the new customers order?

2. Assume that Cane expects to produce and sell 94,000 Alphas during the current year. A supplier has offered to manufacture and deliver 94,000 Alphas to Cane for a price of $136 per unit. What is the financial advantage (disadvantage) of buying 94,000 units from the supplier instead of making those units?

3. Assume that Cane expects to produce and sell 69,000 Alphas during the current year. A supplier has offered to manufacture and deliver 69,000 Alphas to Cane for a price of $136 per unit. What is the financial advantage (disadvantage) of buying 69,000 units from the supplier instead of making those units?

4. How many pounds of raw material are needed to make one unit of each of the two products?

5. What contribution margin per pound of raw material is earned by each of the two products?

6. Assume that Canes customers would buy a maximum of 94,000 units of Alpha and 74,000 units of Beta. Also assume that the companys raw material available for production is limited to 228,000 pounds.

a. How many units of each product should Cane produce to maximize its profits?

b. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

c. If Cane uses its 228,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials?

Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit AlphaBeta $ 24 28 19 32 $ 40 34 21 29 26 29 $179 24 $149 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars