Foundational [LO12-2, LO12-3, LO12-4, LO12-5, LO12-6]

[The following information applies to the questions displayed below.]

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.

References

Section BreakFoundational [LO12-2, LO12-3, LO12-4, LO12-5, LO12-6]

1.

value: 0.20 points

Required information

Foundational 12-1

Required:

1.	What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-1Learning 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

2.

value: 0.20 points

Required information

Foundational 12-2

2.	What is the companys total amount of common fixed expenses?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-2Learning 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

3.

value: 0.20 points

Required information

Foundational 12-3

3.

Assume that Cane expects to produce and sell 92,000 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, how much will its profits increase or decrease?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-3Learning 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

4.

value: 0.20 points

Required information

Foundational 12-4

4.

Assume that Cane expects to produce and sell 102,000 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 $60 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-4Learning 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

5.

value: 0.20 points

Required information

Foundational 12-5

5.

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

rev: 07_09_2014_QC_51026, 07_11_2014_QC_51026, 08_14_2014_QC_52076, 08_18_2014_QC_52076, 08_27_2014_QC_52076, 09_03_2014_QC_52076, 09_09_2014_QC_52076

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-5Learning 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

6.

value: 0.20 points

Required information

Foundational 12-6

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?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-6Learning 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

7.

value: 0.20 points

Required information

Foundational 12-7

7.	Assume that Cane normally produces and sells 52,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-7Learning 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

8.

value: 0.20 points

Required information

Foundational 12-8

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?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-8Learning 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

9.

value: 0.20 points

Required information

Foundational 12-9

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?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-9Learning 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: 0.20 points

Required information

Foundational 12-10

10.

Assume that Cane expects to produce and sell 62,000 Alphas during the current year. A supplier has offered to manufacture and deliver 62,000 Alphas to Cane for a price of $128 per unit. If Cane buys 62,000 units from the supplier instead of making those units, how much will profits increase or decrease?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-10Learning 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

11.

value: 0.20 points

Required information

Foundational 12-11

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

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-11Learning 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

12.

value: 0.20 points

Required information

Foundational 12-12

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

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-12Learning 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

13.

value: 0.20 points

Required information

Foundational 12-13

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?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-13Learning 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

14.

value: 0.20 points

Required information

Foundational 12-14

14.

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. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

References

eBook & Resources

WorksheetLearning 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.

Foundational 12-14Learning 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

15.

value: 0.20 points

Required information

Foundational 12-15

15.

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. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)