Required information

Skip to question

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

Cane Company manufactures two products called Alpha and Beta that sell for $$170$ and $$130,$ respectively. Each product uses only one type of raw material that costs $$6$ per pound. The company has the capacity to annually produce $116,000$ units of each product. Its average cost per unit for each product at this level of activity is given below:

Alpha Beta

Direct materials $ $30$ $ $18$

Direct labor $3025$

Variable manufacturing overhead $2015$

Traceable fixed manufacturing overhead $2628$

Variable selling expenses $2218$

Common fixed expenses $2520$

Total cost per unit $ $153$ $ $124$

The company$$s traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.

$9.$ Assume Cane expects to produce and sell $90,000$ Alphas during the current year. A supplier offered to manufacture and deliver $90,000$ Alphas to Cane for a price of $$120$ per unit. What is the financial advantage $($disadvantage$)$ of buying $90,000$ units from the supplier instead of making those units?