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 $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 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 labour 37 30 Variable manufacturing overhead 24 22 Traceable fixed manufacturing overhead 32 35 Variable selling expenses 29 25 Common fixed expenses 32 27 Cost per unit $ 194 $ 163 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.

Required information (The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $ 40 37 24 32 29 32 $194 Beta $ 24 30 22 35 25 27 $163 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. 3. Assume that Cane expects to produce and sell 97,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customer's offer, how much will its profits increase or decrease? Net operating income by increases decreases