Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively Each product uses only one type of raw material that costs $8 per pound The company has the capacity to annually produce 106,000 units of each product Its unit costs for each product at this level of activity are given below Alpha Beta Direct materials $ 32 $ 16 Direct labor 24 19 Variable manufacturing overhead 10 9 Traceable fixed manufacturing overhead 20 22 Variable selling expenses 16 12 Common fixed expenses 19 14 Total cost per unit $ 121 $ 92 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 99,000 Alphas during the current year One of Cane's sales representatives has found a new customer that is willing to buy 14,000 additional Alphas for a price of $96 per unit If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 7,000 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 rev 09 03 2014 QC 52076, 09 09 2014 QC 52076, 01 17 2015 QC CS 629 References eBook Resources Worksheet Learning Objective 12 03 Prepare a make or buy analysis Learning Objective 12 06 Determine the value of obtaining more of the constrained resource Difficulty 2 Medium Learning Objective 12 04 Prepare an analysis showing whether a special order should be accepted Learning Objective 12 02 Prepare an analysis showing whether a product line or other business segment should be added or dropped Learning Objective 12 05 Determine the most profitable use of a constrained resource Check my work 6 value 1 00 points Required information 6 Assume that Cane normally produces and sells 94,000 Betas per year If Cane discontinues the Beta product line, how much will profits increase or decrease References eBook Resources Worksheet Learning Objective 12 03 Prepare a make or buy analysis Learning Objective 12 06 Determine the value of obtaining more of the constrained resource Difficulty 2 Medium Learning Objective 12 04 Prepare an analysis showing whether a special order should be accepted Learning Objective 12 02 Prepare an analysis showing whether a product line or other business segment should be added or dropped Learning Objective 12 05 Determine the most profitable use of a constrained resource Check my work 7 value 1 00 points Required information 7 Assume that Cane normally produces and sells 44,000 Betas per year If Cane discontinues the Beta product line, how much will profits increase or decrease References eBook Resources Worksheet Learning Objective 12 03 Prepare a make or buy analysis Learning Objective 12 06 Determine the value of obtaining more of the constrained resource Difficulty 2 Medium Learning Objective 12 04 Prepare an analysis showing whether a special order should be accepted Learning Objective 12 02 Prepare an analysis showing whether a product line or other business segment should be added or dropped Learning Objective 12 05 Determine the most profitable use of a constrained resource Check my work 8 value 1 00 points Required information 8 Assume that Cane normally produces and sells 64,000 Betas and 84,000 Alphas per year If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 19,000 units If Cane discontinues the Beta product line, how much would profits increase or decrease References eBook Resources Worksheet Learning Objective 12 03 Prepare a make or buy analysis Learning Objective 12 06 Determine the value of obtaining more of the constrained resource Difficulty 2 Medium Learning Objective 12 04 Prepare an analysis showing whether a special order should be accepted Learning Objective 12 02 Prepare an analysis showing whether a product line or other business segment should be added or dropped Learning Objective 12 05 Determine the most profitable use of a constrained resource Check my work 9 value 1 00 points Required information 9 Assume that Cane expects to produce and sell 84,000 Alphas during the current year A supplier has offered to manufacture and deliver 84,000 Alphas to Cane for a price of $96 per unit If Cane buys 84,000 units from the supplier instead of making those units, how much will profits increase or decrease References eBook Resources Worksheet Learning Objective 12 03 Prepare a make or buy analysis Learning Objective 12 06 Determine the value of obtaining more of the constrained resource Difficulty 2 Medium Learning Objective 12 04 Prepare an analysis showing whether a special order should be accepted Learning Objective 12 02 Prepare an analysis showing whether a product line or other business segment should be added or dropped Learning Objective 12 05 Determine the most profitable use of a constrained resource Check my work 10 value 1 00 points Required information 10 Assume that Cane expects to produce and sell 54,000 Alphas during the current year A supplier has offered to manufacture and deliver 54,000 Alphas to Cane for a price of $96 per unit If Cane buys 54,000 units from the supplier instead of making those units, how much will profits increase or decrease

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Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material

Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha			Beta
Direct materials		$	32		$	16
Direct labor			24			19
Variable manufacturing overhead			10			9
Traceable fixed manufacturing overhead			20			22
Variable selling expenses			16			12
Common fixed expenses			19			14

Total cost per unit		$	121		$	92

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 99,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 14,000 additional Alphas for a price of $96 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 7,000 units.

a.	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

rev: 09_03_2014_QC_52076, 09_09_2014_QC_52076, 01_17_2015_QC_CS-629

References

eBook & Resources

WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.

Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.

Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.

Check my work

value: 1.00 points

Required information

6.	Assume that Cane normally produces and sells 94,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

References

eBook & Resources

WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.

Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.

Check my work

value: 1.00 points

Required information

7.	Assume that Cane normally produces and sells 44,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

References

eBook & Resources

WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.

Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.

Check my work

value: 1.00 points

Required information

8.	Assume that Cane normally produces and sells 64,000 Betas and 84,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 19,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

References

eBook & Resources

WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.

Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.

Check my work

value: 1.00 points

Required information

9.	Assume that Cane expects to produce and sell 84,000 Alphas during the current year. A supplier has offered to manufacture and deliver 84,000 Alphas to Cane for a price of $96 per unit. If Cane buys 84,000 units from the supplier instead of making those units, how much will profits increase or decrease?

References

eBook & Resources

WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.

Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.

Check my work

10.

value: 1.00 points

Required information

10.

Assume that Cane expects to produce and sell 54,000 Alphas during the current year. A supplier has offered to manufacture and deliver 54,000 Alphas to Cane for a price of $96 per unit. If Cane buys 54,000 units from the supplier instead of making those units, how much will profits increase or decrease?