Question
Question 7 Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of
Question 7
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 40 | $ | 24 | ||||
Direct labor | 29 | 25 | ||||||
Variable manufacturing overhead | 15 | 14 | ||||||
Traceable fixed manufacturing overhead | 25 | 27 | ||||||
Variable selling expenses | 21 | 17 | ||||||
Common fixed expenses | 24 | 19 | ||||||
Total cost per unit | $ | 154 | $ | 126 | ||||
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
7. Assume that Cane normally produces and sells 49,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Question 8
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 40 | $ | 24 | ||||
Direct labor | 29 | 25 | ||||||
Variable manufacturing overhead | 15 | 14 | ||||||
Traceable fixed manufacturing overhead | 25 | 27 | ||||||
Variable selling expenses | 21 | 17 | ||||||
Common fixed expenses | 24 | 19 | ||||||
Total cost per unit | $ | 154 | $ | 126 | ||||
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
8. Assume that Cane normally produces and sells 69,000 Betas and 89,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 13,000 units. What is the financial advantage (disadvantage) of
Question 9
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Question 10
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 40 | $ | 24 | ||||
Direct labor | 29 | 25 | ||||||
Variable manufacturing overhead | 15 | 14 | ||||||
Traceable fixed manufacturing overhead | 25 | 27 | ||||||
Variable selling expenses | 21 | 17 | ||||||
Common fixed expenses | 24 | 19 | ||||||
Total cost per unit | $ | 154 | $ | 126 | ||||
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
10. Assume that Cane expects to produce and sell 59,000 Alphas during the current year. A supplier has offered to manufacture and deliver 59,000 Alphas to Cane for a price of $116 per unit. What is the financial advantage (disadvantage) of buying 59,000 units from the supplier instead of making those units?
Question 11
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 40 | $ | 24 | ||||
Direct labor | 29 | 25 | ||||||
Variable manufacturing overhead | 15 | 14 | ||||||
Traceable fixed manufacturing overhead | 25 | 27 | ||||||
Variable selling expenses | 21 | 17 | ||||||
Common fixed expenses | 24 | 19 | ||||||
Total cost per unit | $ | 154 | $ | 126 | ||||
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
11. How many pounds of raw material are needed to make one unit of each of the two products?
Question 12
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 40 | $ | 24 | ||||
Direct labor | 29 | 25 | ||||||
Variable manufacturing overhead | 15 | 14 | ||||||
Traceable fixed manufacturing overhead | 25 | 27 | ||||||
Variable selling expenses | 21 | 17 | ||||||
Common fixed expenses | 24 | 19 | ||||||
Total cost per unit | $ | 154 | $ | 126 | ||||
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
12. What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.)
Alpha Beta
Contribution margin per pound. _____. ________
Alpha | Beta | |||||||
Direct materials | $ | 40 | $ | 24 | ||||
Direct labor | 29 | 25 | ||||||
Variable manufacturing overhead | 15 | 14 | ||||||
Traceable fixed manufacturing overhead | 25 | 27 | ||||||
Variable selling expenses | 21 | 17 | ||||||
Common fixed expenses | 24 | 19 | ||||||
Total cost per unit | $ | 154 | $ | 126 | ||||
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
9. Assume that Cane expects to produce and sell 89,000 Alphas during the current year. A supplier has offered to manufacture and deliver 89,000 Alphas to Cane for a price of $116 per unit. What is the financial advantage (disadvantage) of buying 89,000 units from the supplier instead of making those units?
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