Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	30			$	10
Direct labor			22				29
Variable manufacturing overhead			20				13
Traceable fixed manufacturing overhead			24				26
Variable selling expenses			20				16
Common fixed expenses			23				18
Total cost per unit		$	139			$	112

The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.

5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 18,000 additional Alphas for a price of $112 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 9,000 units.

a. What is the financial advantage (disadvantage) of accepting the new customers order?

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

Ch 12 HW G Saved Help Save & Exit Subm Check my work 5 [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its average cost per unit for each product at this level of activity are given below Part 5 of 14 1.07 points AlphaBeta $ 30 10 29 13 26 16 18 $112 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit 20 24 20 23 $139 eBook Print References The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 18,000 additional Alphas or a price of $112 per unit, however pursuing this opportunity will decrease Alpha sales to regular customers by 9,000 units. a. What is the financial advantage (disadvantage) of accepting the new customer's order? o. Based on your calculations above should the special order be accepted? Mc Graw Hill 14 I of 14 lea 5 6 7 1- Next > ( prev 30