Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	30			$	18
Direct labor			30				25
Variable manufacturing overhead			20				15
Traceable fixed manufacturing overhead			26				28
Variable selling expenses			22				18
Common fixed expenses			25				20
Total cost per unit		$	153			$	124

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.

Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	30			$	18
Direct labor			30				25
Variable manufacturing overhead			20				15
Traceable fixed manufacturing overhead			26				28
Variable selling expenses			22				18
Common fixed expenses			25				20
Total cost per unit		$	153			$	124

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. What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line? Alpha ______ Beta ________

2. What is the companys total amount of common fixed expenses? Total common fixed expenses ____________

3. Assume that Cane expects to produce and sell 90,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 20,000 additional Alphas for a price of $120 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease? Increases/Decreases by ___________

4. Assume that Cane expects to produce and sell 100,000 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 $49 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

Net Operating Income Increases/Decreases by ____________

5. Assume that Cane expects to produce and sell 105,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 20,000 additional Alphas for a price of $120 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 9,000 units.

Calculate the incremental net operating income if the order is accepted?

Incremental net operating income_______

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