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Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material
Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. Its unit costs for each product at this level of activity are given below: The company considers its traceable fixed manufacturing overhead to be avoidable, where as its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. Required: What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line? What is the company's total amount of common fixed expenses? Assume that Cane expects to produce and sell 99,000 Alpha during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 29,000 additional Alphas for a price of $156 per unit. If Cane accepts the customer's offer, how much will its increase or decrease? Assume that Cane expects to produce and sell 109,000 Betas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 5,000 additional Betas for a price of $82 per unit. If Cane accepts the customer's offer, how much will its profits increase or decrease? Assume that Cane expects to produce and sell 114,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 29,000 additional Alphas for a price of $158 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 13,000 units. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.) Based on your calculations above should the special order be accepted? Yes No
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