Cane Company manufactures two products called Alpha and Beta that sell for $180 and $145, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	36			$	24
Direct labor			32				27
Variable manufacturing overhead			19				17
Traceable fixed manufacturing overhead			27				30
Variable selling expenses			24				20
Common fixed expenses			27				22
Total cost per unit		$	165			$	140

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.

Assume that Cane expects to produce and sell 107,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 22,000 additional Alphas for a price of $128 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 11,000 units.

a.	Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)

b.

Based on your calculations above should the special order be accepted?

	Yes
	No

15.

value: 1.00 points

Required information

6.	Assume that Cane normally produces and sells 102,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

16.

value: 1.00 points

Required information

8.	Assume that Cane normally produces and sells 72,000 Betas and 92,000 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?

17.

value: 1.00 points

Required information

9.	Assume that Cane expects to produce and sell 92,000 Alphas during the current year. A supplier has offered to manufacture and deliver 92,000 Alphas to Cane for a price of $128 per unit. If Cane buys 92,000 units from the supplier instead of making those units, how much will profits increase or decrease?

18.

value: 1.00 points

Required information

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

19.

value: 1.00 points

Required information

12.	What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.)

20.

value: 1.00 points

Required information

13.	Assume that Canes customers would buy a maximum of 92,000 units of Alpha and 72,000 units of Beta. Also assume that the companys raw material available for production is limited to 300,000 pounds. How many units of each product should Cane produce to maximize its profits?