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 unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	42			$	21
Direct labor			35				28
Variable manufacturing overhead			23				21
Traceable fixed manufacturing overhead			31				34
Variable selling expenses			28				24
Common fixed expenses			31				26
Total cost per unit		$	190			$	154

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.

PLEASE ANSWER THE FOLLOWING:

1. Assume that Cane expects to produce and sell 106,000 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 $74 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

2. 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 that is willing to buy 26,000 additional Alphas for a price of $144 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 12,000 units. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)

3. Assume that Cane normally produces and sells 76,000 Betas and 96,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 16,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

4. Assume that Cane expects to produce and sell 71,000 Alphas during the current year. A supplier has offered to manufacture and deliver 71,000 Alphas to Cane for a price of $144 per unit. If Cane buys 71,000 units from the supplier instead of making those units, how much will profits increase or decrease?

5. Assume that Canes customers would buy a maximum of 96,000 units of Alpha and 76,000 units of Beta. Also assume that the companys raw material available for production is limited to 246,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

6. Assume that Canes customers would buy a maximum of 96,000 units of Alpha and 76,000 units of Beta. Also assume that the companys raw material available for production is limited to 246,000 pounds. How many units of each product should Cane produce to maximize its profits?

7. How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta?