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
Traceable fixed manufacturing overhead	?	?

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

Total common fixed expenses: ___________

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.

a.

Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.) Incremental net operating income______________ 6. Assume that Cane normally produces and sells 100,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? Profit:_____

7. Assume that Cane normally produces and sells 50,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

Profit

increases

by

________