Required information

The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6]

Skip to question

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

Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 117,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

	Alpha	Beta
Direct materials	$ 40	$ 15
Direct labor	30	30
Variable manufacturing overhead	18	16
Traceable fixed manufacturing overhead	26	29
Variable selling expenses	23	19
Common fixed expenses	26	21
Total cost per unit	$ 163	$ 130

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.

Foundational 11-9 (Algo)

9. Assume that Cane expects to produce and sell 91,000 Alphas during the current year. A supplier has offered to manufacture and deliver 91,000 Alphas to Cane for a price of $124 per unit. What is the financial advantage (disadvantage) of buying 91,000 units from the supplier instead of making those units?

Foundational 11-10 (Algo)

10. Assume that Cane expects to produce and sell 61,000 Alphas during the current year. A supplier has offered to manufacture and deliver 61,000 Alphas to Cane for a price of $124 per unit. What is the financial advantage (disadvantage) of buying 61,000 units from the supplier instead of making those units?