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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 $170
Required information [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: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha Beta $ 30 $ 18 30 25 20 15 26 28 22 18 25 20 $ 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. 5. Assume Cane expects to produce and sell 105,000 Alphas during the current year. One of Cane's sales representatives found a new customer willing to buy 20,000 additional Alphas for a price of $120 per unit; however, pursuing this opportunity will decrease Alpha sales to regular customers by 9,000 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.
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