Question
Cane company manufactures two products calle alpha and beta that sell for $130 and $90 each product uses onlyone type of rawn material that cost
Cane company manufactures two products calle alpha and beta that sell for $130 and $90 each product uses onlyone type of rawn material that cost $5 per pound the ccompany has the capacity to annually produce 102000 units of each product its average coast per unit for each product at this level of activityare given below
Direct materials Alpha $25 Beta $10 direct labor 22 21 Variable manufacturing overhead 17 7 Tracable fixed manufacturing overhead 18 20 variable selling expenses 14 10 common fixed expenses 17 12 Total cost per unit 113 80 The company considers its tracable fixed manufacturing overhead to be avoidable whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars..
Assume that Cane expects to produce and sell 82000 Alphas during the current year one of canes sales representives has found a new customer who is willing tobuy 12000 additional Alphas for a price of $88 per unit what is the financial advantage or disadvantage of accepting the new customers order
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