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 are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 42 35 23 31 28 31 $190 Beta $ 21 28 21 34 24 26 $154 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 111,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 26,000 additional Alphas for a price of $144 per unit, however pursuing this opportunity will decrease Alpha sales to regular customers by 12,000 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? 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 are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $.42 35 23 31 28 31 $190 Beta $ 21 28 21 34 24 26 $154 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. 6. Assume that Cane normally produces and sells 106,000 Beras per year. What is the financial advantage (disadvantage) of discontinuing the Beto product line? Financial (disadvantage 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 are given below Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 42 35 23 31 28 31 $190 Beta $ 21 28 21 34 24 26 $154 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. 7. Assume that Cane normally produces and sells 56,000 Betas per year. What is the financial advantage (disadvantage of discontinuing the Beta product line? Financial advantage 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 are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $42 35 23 31 28 31 $190 Beta $ 21 28 21 34 24 26 $154 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. 8. Assume that Cane normally produces and sells 76.000 Betas and 96.000 Alphas per year. If Cone discontinues the Beta product line, its sales representatives could increase sales of Alpha by 16,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line? Financial advantage 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 are given below Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 42 35 23 31 28 31 $190 Beta $ 21 28 21 34 24 26 $154 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. 9. Assume that Cane expects to produce and sell 96,000 Alphas during the current year. A supplier has offered to manufacture and deliver 96.000 Alphas to Cane for a price of $144 per unit. What is the financial advantoge (disadvantage) of buying 96,000 units from the supplier instead of making those units? Financial (disadvantage
