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Required information [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $240
Required information [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Direct materials Alpha $ 35 Beta $ 15 Direct labor 48 23 Variable manufacturing overhead 27 25 Traceable fixed manufacturing overhead 35 38 Variable selling expenses 32 28 Common fixed expenses 35 30 Total cost per unit $ 212 $ 159 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. 5. Assume Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives found a new customer willing to buy 30,000 additional Alphas for a price of $160 per unit; however, pursuing this opportunity will decrease Alpha sales to regular customers by 14,000 units. a. What is the financial advantage (disadvantage) of accepting the new customer's order? b. Based on your calculations above should the special order be accepted? Complete this question by entering your answers in the tabs below. Required 5A Required 5B What is the financial advantage (disadvantage) of accepting the new customer's order?
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