ane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	40			$	24
Direct labor			37				30
Variable manufacturing overhead			24				22
Traceable fixed manufacturing overhead			32				35
Variable selling expenses			29				25
Common fixed expenses			32				27
Total cost per unit		$	194			$	163

The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.

4.

Assume that Cane expects to produce and sell 107,000 Betas during the current year. One of Canes sales representatives has found a new customer that is willing to buy 4,000 additional Betas for a price of $80 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

*net operating income decreases by____?*

Assume that Cane expects to produce and sell 112,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 12,000 units.

a.

Calculate the incremental net operating income if the order is accepted?

*incremental net operating income_______*

Assume that Cane expects to produce and sell 97,000 Alphas during the current year. A supplier has offered to manufacture and deliver 97,000 Alphas to Cane for a price of $148 per unit. If Cane buys 97,000 units from the supplier instead of making those units, how much will profits increase or decrease?

*Profit decreases by _____?*

Assume that Cane expects to produce and sell 72,000 Alphas during the current year. A supplier has offered to manufacture and deliver 72,000 Alphas to Cane for a price of $148 per unit. If Cane buys 72,000 units from the supplier instead of making those units, how much will profits increase or decrease?

*profit increases by ____?*

11.

How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta? What contribution margin per pound of raw material is earned by Alpha and Beta? Assume that Canes customers would buy a maximum of 97,000 units of Alpha and 77,000 units of Beta. Also assume that the companys raw material available for production is limited to 247,000 pounds. How many units of each product should Cane produce to maximize its profits? *need to know units producted by alpha and beta? Assume that Canes customers would buy a maximum of 97,000 units of Alpha and 77,000 units of Beta. Also assume that the companys raw material available for production is limited to 247,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials? *whats the total contribution margin?* Assume that Canes customers would buy a maximum of 97,000 units of Alpha and 77,000 units of Beta. Also assume that the companys raw material available for production is limited to 247,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.) *Whats the maximum price to be paid per pound?*