#18

Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 110,000 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 Alpha $ 24 23 22 23 19 22 $133 Beta $ 12 26 12 25 15 17 $107 The company considers its traceable fixed manufacturing overhead to be avoidoble, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 3. Assume that Cane expects to produce and sell 87,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 17,000 additional Alphas for a price of $108 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order? Financial (disadvantage) Financial advantage