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Cane Company manufactures two products called Alpha and Beta that sell for $ 2 1 5 and $ 1 6 0 , respectively. Each product

Cane Company manufactures two products called Alpha and Beta that sell for $215 and $160, respectively. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its average cost per unit for each product at this level of activity is given below:
Alpha Beta
Direct materials $ 42 $ 21
Direct labor 3528
Variable manufacturing overhead 2321
Traceable fixed manufacturing overhead 3134
Variable selling expenses 2824
Common fixed expenses 3126
Total cost per unit $ 190 $ 154
The companys traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
10. Assume Cane expects to produce and sell 71,000 Alphas during the current year. A supplier offered to manufacture and deliver 71,000 Alphas to Cane for a price of $144 per unit. What is the financial advantage (disadvantage) of buying 71,000 units from the supplier instead of making those units? Cane Company manufactures two products called Alpha and Beta that sell for $215 and $160, respectively. Each product
uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000
units of each product. Its average cost per unit for each product at this level of activity is given below:
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 71,000 Alphas during the current year. A supplier offered to manufacture and deliver
71,000 Alphas to Cane for a price of $144 per unit. What is the financial advantage (disadvantage) of buying 71,000 units from the
supplier instead of making those units?
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