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 unit costs for each product at this level of activity are given below Alpha Beta Direct materials $ 40 $ 24 Direct labor 34 28 Variable manufacturing overhead 21 19 Traceable fixed manufacturing overhead 29 32 Variable selling expenses 26 22 Common fixed expenses 29 24 Total cost per unit $ 179 $ 149 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 1 Assume that Cane expects to produce and sell 104,000 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 $62 per unit If Cane accepts the customers offer, how much will its profits increase or decrease 2 Assume that Cane expects to produce and sell 109,000 Alphas during the current year One of Cane's sales representatives has found a new customer that is willing to buy 24,000 additional Alphas for a price of $136 per unit If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 11,000 units Calculate the incremental net operating income if the order is accepted (Loss amount should be indicated with a minus sign ) 3 Assume that Cane expects to produce and sell 94,000 Alphas during the current year A supplier has offered to manufacture and deliver 94,000 Alphas to Cane for a price of $136 per unit If Cane buys 94,000 units from the supplier instead of making those units, how much will profits increase or decrease 4 Assume that Cane expects to produce and sell 69,000 Alphas during the current year A supplier has offered to manufacture and deliver 69,000 Alphas to Cane for a price of $136 per unit If Cane buys 69,000 units from the supplier instead of making those units, how much will profits increase or decrease

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 28, 2024

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

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 unit costs for each product at this level of activity are given below:

	Alpha	Beta
Direct materials		$	40	$	24
Direct labor			34		28
Variable manufacturing overhead			21		19
Traceable fixed manufacturing overhead			29		32
Variable selling expenses			26		22
Common fixed expenses			29		24

Total cost per unit		$	179	$	149

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

1. Assume that Cane expects to produce and sell 104,000 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 $62 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

2. Assume that Cane expects to produce and sell 109,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 24,000 additional Alphas for a price of $136 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 11,000 units. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)

3. Assume that Cane expects to produce and sell 94,000 Alphas during the current year. A supplier has offered to manufacture and deliver 94,000 Alphas to Cane for a price of $136 per unit. If Cane buys 94,000 units from the supplier instead of making those units, how much will profits increase or decrease?

4. Assume that Cane expects to produce and sell 69,000 Alphas during the current year. A supplier has offered to manufacture and deliver 69,000 Alphas to Cane for a price of $136 per unit. If Cane buys 69,000 units from the supplier instead of making those units, how much will profits increase or decrease?