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Assume that Cane expects to produce and sell 111,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 26,000 additional Alphas for a price of $144 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? (Loss amount should be indicated with a minus sign.)

b.

Based on your calculations above should the special order be accepted?

	Yes
	No

Cane Company manufactures two products called Alpha and Beta that sell for $215 and $160, respectively. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its unit costs for each product at this level of activity are given below:

	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 overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars

Assume that Cane expects to produce and sell 96,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 26,000 additional Alphas for a price of $144 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

Assume that Cane expects to produce and sell 106,000 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 $74 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?