Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 units of each product. Its unit costs for each product at this level of activity are given below:

Alpha Beta

Direct materials Alpha- $30 Beta- $18

Direct labor Alpha- 30 Beta- 25

Variable manufacturing overhead Alpha- 20 Beta- 15

Traceable fixed manufacturing overhead Alpha-26 Beta- 28

Variable selling expenses Alpha- 22 Beta- 18

Common fixed expenses Alpha- 25 Beta- 20

Total cost per unit Alpha- $153 Beta- $124

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.

3. Assume that Cane expects to produce and sell 90,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 20,000 additional Alphas for a price of $120 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

4. Assume that Cane expects to produce and sell 100,000 Betas during the current year. One of Canes sales representatives has found a new customer that is willing to buy 3,000 additional Betas for a price of $49 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

5.Assume that Cane expects to produce and sell 105,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 20,000 additional Alphas for a price of $120 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 9,000 units.

5a. Calculate the incremental net operating income if the order is accepted?

6. Assume that Cane normally produces and sells 100,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

7. Assume that Cane normally produces and sells 50,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

8. Assume that Cane normally produces and sells 70,000 Betas and 90,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 14,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

9. Assume that Cane expects to produce and sell 90,000 Alphas during the current year. A supplier has offered to manufacture and deliver 90,000 Alphas to Cane for a price of $120 per unit. If Cane buys 90,000 units from the supplier instead of making those units, how much will profits increase or decrease?

10. Assume that Cane expects to produce and sell 60,000 Alphas during the current year. A supplier has offered to manufacture and deliver 60,000 Alphas to Cane for a price of $120 per unit. If Cane buys 60,000 units from the supplier instead of making those units, how much will profits increase or decrease?

11. How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta?

Alpha - Beta

12. What contribution margin per pound of raw material is earned by Alpha and Beta?

Alpha - Beta -

13. Assume that Canes customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the companys raw material available for production is limited to 221,000 pounds. How many units of each product should Cane produce to maximize its profits?

Alpha - Beta

14. Assume that Canes customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the companys raw material available for production is limited to 221,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

15. Assume that Canes customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the companys raw material available for production is limited to 221,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials?