! Required information [The following information applies to the questions displayed below.) A company produces two products. Product 1 sells for $215 and Product 2 sells for $160. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Product Product 1 2 $ 42 $ 21 35 28 23 21 31 34 28 24 31 26 $190 $154 Pama 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. Consider each of the following questions separately. 1. The company expects to produce and sell 96,000 units of Product 1 during the current year. One of the company's sales representatives has found a new customer who wants to buy 26,000 additional units of Product 1 for a price of $144 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order? Required information [The following information applies to the questions displayed below. A company produces two products. Product 1 sells for $215 and Product 2 sells for $160. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Product 1 Product 2 $ 42 $ 21 35 28 23 21 31 34 28 24 31 26 $190 $154 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. Consider each of the following questions separately. 3. Assume the company normally produces and sells 106,000 unit of Product 2 per year. What is the financial advantage (disadvantage) of discontinuing Product 2? ! Required information [The following information applies to the questions displayed below. A company produces two products. Product 1 sells for $215 and Product 2 sells for $160. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Product 1 Product Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit $ 42 35 23 31 28 31 $190 2 $ 21 28 21 34 24 26 $154 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. Consider each of the following questions separately. 5. The company expects to produce and sell 96,000 units of Product 1 during the current year. A supplier has offered to manufacture and deliver 96,000 units for a price of $144 per unit. What is the financial advantage (disadvantage) of buying 96,000 Product 1 units from the supplier instead of making those units? Required information [The following information applies to the questions displayed below.) A company produces two products. Product 1 sells for $215 and Product 2 sells for $160. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Product 1 Product 2 $ 42 $ 21 35 28 23 21 31 34 28 24 31 26 $190 $154 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. Consider each of the following questions separately. 7. The company's customers will buy a maximum of 96,000 units of Product 1 and 76,000 units of Product 2. If there are only 246,000 pounds of raw material available for production, how many units of each product should be produced to maximize profits
