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Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of raw material
Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 108,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta $ 30 26 13 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit $ 15 18 21 $130 24 14 16 $102 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 4. Assume that Cane expects to produce and sell 96,000 Betas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 2,000 additional Betas for a price of $45 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order? 6. Assume that Cane normally produces and sells 96,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line? 9. Assume that Cane expects to produce and sell 86,000 Alphas during the current year. A supplier has offered to (disadvantage) of buying 86,000 Alphas to Cane for a o the current manufacture and deliver 86,000 Alphas to Cane for a price of $104 per unit. What is the financial advantage (disadvantage) of buying 86,000 units from the supplier instead of making those units? t. How many pounds of raw material are needed to make one unit of each of the two products? Alpha Beta Pounds of raw materials per unit What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.) Alpha Beta Contribution margin per pound 13. Assume that Cane's customers would buy a maximum of 86,000 units of Alpha and 66,000 units of Beta. Also mited to 210,000 pound product should Cane produce to maximize its profits? AlphaBeta Units produced
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