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Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of raw
Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 108,000 units of each product. Its average cost per unit for each product at this level of activity is given below. Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 30 Beta $ 15 26 22 13 11 22 24 18 14 21 16 $ 130 $ 102 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume Cane expects to produce and sell 96,000 Betas during the current year. One of Cane's sales representatives found a new ustomer willing to buy 2,000 additional Betas for a price of $45 per unit. What is the financial advantage (disadvantage) of accepting e new customer's order? Financial advantage Financial (disadvantage)
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