Cane Company manufactures two products called Alpha and Beta that sell for $185 and $150, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 119,000 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			33				28
Variable manufacturing overhead			20				18
Traceable fixed manufacturing overhead			28				31
Variable selling expenses			25				21
Common fixed expenses			28				23
Total cost per unit		$	174			$	145

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.

5.

Assume that Cane expects to produce and sell 108,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 23,000 additional Alphas for a price of $132 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?

6. Assume that Cane normally produces and sells 103,000 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 53,000 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 73,000 Betas and 93,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 13,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

9. Assume that Cane expects to produce and sell 93,000 Alphas during the current year. A supplier has offered to manufacture and deliver 93,000 Alphas to Cane for a price of $132 per unit. If Cane buys 93,000 units from the supplier instead of making those units, how much will profits increase or decrease?

10.

Assume that Cane expects to produce and sell 68,000 Alphas during the current year. A supplier has offered to manufacture and deliver 68,000 Alphas to Cane for a price of $132 per unit. If Cane buys 68,000 units from the supplier instead of making those units, how much will profits increase or decrease?

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

12. What contribution margin per pound of raw material is earned by Alpha and Beta?

13. Assume that Canes customers would buy a maximum of 93,000 units of Alpha and 73,000 units of Beta. Also assume that the companys raw material available for production is limited to 227,000 pounds. How many units of each product should Cane produce to maximize its profits?

14. Assume that Canes customers would buy a maximum of 93,000 units of Alpha and 73,000 units of Beta. Also assume that the companys raw material available for production is limited to 227,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

15.

Assume that Canes customers would buy a maximum of 93,000 units of Alpha and 73,000 units of Beta. Also assume that the companys raw material available for production is limited to 227,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)