Cane Company manufactures two products called Alpha and Beta that sell for $$130$ and $$90,$ respectively. Each product

uses only one type of raw material that costs $$5$ per pound. The company has the capacity to annually produce $102,000$

units of each product. Its average cost per unit for each product at this level of activity are given below:

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.

Assume that Cane expects to produce and sell $97,000$ Alphas during the current year. One of Cane's sales representatives has

found a new customer who is willing to buy $12,000$ additional Alphas for a price of $$88$ per unit; however pursuing this opportunity $v$

decrease Alpha sales to regular customers by $7,000$ units.

a$.$ What is the financial advantage $($disadvantage$)$ of accepting the new customer's order?

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

Complete this question by entering your answers in the tabs below.

What is the financial advantage $($disadvantage$)$ of accepting the new customer's order?