Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively Each product uses only one type of raw material that costs $8 per pound The company has the capacity to annually produce 127,000 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 37 30 Variable manufacturing overhead 24 22 Traceable fixed manufacturing overhead 32 35 Variable selling expenses 29 25 Common fixed expenses 32 27 Total cost per unit $ 194 $ 163 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 3 Assume that Cane expects to produce and sell 97,000 Alphas during the current year One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit If Cane accepts the customers offer, how much will its profits increase or decrease 4 Assume that Cane expects to produce and sell 107,000 Betas during the current year One of Canes sales representatives has found a new customer that is willing to buy 4,000 additional Betas for a price of $80 per unit If Cane accepts the customers offer, how much will its profits increase or decrease 5 Assume that Cane expects to produce and sell 112,000 Alphas during the current year One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 12,000 units a Calculate the incremental net operating income if the order is accepted 6 Assume that Cane normally produces and sells 107,000 Betas per year If Cane discontinues the Beta product line, how much will profits increase or decrease 7 Assume that Cane normally produces and sells 57,000 Betas per year If Cane discontinues the Beta product line, how much will profits increase or decrease 8 Assume that Cane normally produces and sells 77,000 Betas and 97,000 Alphas per year If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 12,000 units If Cane discontinues the Beta product line, how much would 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 Jul 30, 2024

Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material

Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 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			37			30
Variable manufacturing overhead			24			22
Traceable fixed manufacturing overhead			32			35
Variable selling expenses			29			25
Common fixed expenses			32			27
Total cost per unit		$	194		$	163
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. 3. Assume that Cane expects to produce and sell 97,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease? 4. Assume that Cane expects to produce and sell 107,000 Betas during the current year. One of Canes sales representatives has found a new customer that is willing to buy 4,000 additional Betas for a price of $80 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease? 5. Assume that Cane expects to produce and sell 112,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 12,000 units. a. Calculate the incremental net operating income if the order is accepted? 6. Assume that Cane normally produces and sells 107,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? 7. Assume that Cane normally produces and sells 57,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? 8. Assume that Cane normally produces and sells 77,000 Betas and 97,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 12,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?