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Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw
Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 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 $ 40 Beta $ 24 34 28 21 19 29 32 26 22 29 24 $ 179 $ 149 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. 2. What is the company's total common fixed expenses? Total common fixed expenses 3. Assume Cane expects to produce and sell 94,000 Alphas during the current year. One of Cane's sales representatives found a new customer willing to buy 24,000 additional Alphas for a price of $136 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order? Financial advantage 4. Assume Cane expects to produce and sell 104,000 Betas during the current year. One of Cane's sales representatives found a new customer willing to buy 3,000 additional Betas for a price of $62 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order? Financial (disadvantage) 6. Assume Cane normally produces and sells 104,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line? Financial (disadvantage) 7. Assume Cane normally produces and sells 54,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line? Financial advantage
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