The Foundational 15 [LO12-2, L012-3, L012-4, L012-5, LO12-6] [The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 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 Alpha $ 30 20 7 16 12 15 $180 Beta $12 15 5 18 8 1e $68 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 12-8 8. Assume that Cane normally produces and sells 60,000 Betas and 80,000 Alphas per year. If Cane discontinues the Beta product line, Its sales representatives could increase sales of Alpha by 15,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line? Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 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 Alpha $ 30 20 7 16 12 15 $180 Beta $12 15 5 18 8 10 $68 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 12-9 9. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. A supplier has offered to manufacture and deliver 80.000 Alphas to Cane for a price of $80 per unit What is the financial advantage (disadvantage of buying 80,000 units from the supplier instead of making those units? Case A: The company chronically has no idle capacity and the old Model B100 machine is the company's constraint. Management is considering purchasing a Model B300 machine to use in addition to the company's present Model B100 machine. The old Model B100 machine will continue to be used to capacity as before, with the new Model B300 machine being used to expand production. This will increase the company's production and sales. The increase in volume will be large enough to require increases in fixed selling expenses and in general administrative overhead, but not in the fixed manufacturing overhead. Case B: The old Model B100 machine is not the company's constraint, but management is considering replacing it with a new Model B300 machine because of the potential savings in direct materials with the new machine. The Model B100 machine would be sold. This change will have no effect on production or sales, other than some savings in direct materials costs due to less waste. Required: Based on the information provided above indicate in the appropriate column whether each item is relevant or irrelevant to the decision context described in Case A and Case B. Item Case A Case B a. Sales revenue b. Direct materials c. Direct labor d. Variable manufacturing overhead e. Depreciation-Model B100 machine 6. Book value-Model B100 machine g. Disposal value-Model B100 machine h. Market value-Model B300 machine (cost) i. Fixed manufacturing overhead (general) i. Variable selling expense k. Foced selling expense I. General administrative overhead