Cane Company manufactures two products called Alpha and Betathat sell for $225 and $175, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 130,000 units of each product. Itsaverage cost per unit for each product at this level of activityare given below:
Alpha Beta Directmaterials $ 42 $ 24 Direct labor 42 32 Variable manufacturingoverhead 26 24 Traceable fixed manufacturingoverhead 34 37 Variable selling expenses 31 27 Common fixed expenses 34 29 Total cost per unit $ 209 $ 173
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are unavoidableand have been allocated to products based on sales dollars.
1. What is the total amount of traceable fixed manufacturingoverhead for each of the two products, Alpha and Beta? and What isthe companyâs total amount of common fixed expenses?
2. Assume that Cane expects to produce and sell 99,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer who is willing to buy 29,000 additional Alphasfor a price of $156 per unit. What is the financial advantage(disadvantage) of accepting the new customer's order?
3. Assume that Cane expects to produce and sell 109,000 Betasduring the current year. One of Caneâs sales representatives hasfound a new customer who is willing to buy 5,000 additional Betasfor a price of $82 per unit. What is the financial advantage(disadvantage) of accepting the new customer's order?
4. Assume that Cane expects to produce and sell 114,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer who is willing to buy 29,000 additional Alphasfor a price of $156 per unit; however pursuing this opportunitywill decrease Alpha sales to regular customers by 13,000 units.What is the financial advantage (disadvantage) of accepting the newcustomerâs order?
Cane Company manufactures two products called Alpha and Betathat sell for $225 and $175, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 130,000 units of each product. Itsaverage cost per unit for each product at this level of activityare given below:
| Alpha | Beta | |||||||
| Directmaterials | $ | 42 | $ | 24 | ||||
| Direct labor | 42 | 32 | ||||||
| Variable manufacturingoverhead | 26 | 24 | ||||||
| Traceable fixed manufacturingoverhead | 34 | 37 | ||||||
| Variable selling expenses | 31 | 27 | ||||||
| Common fixed expenses | 34 | 29 | ||||||
| Total cost per unit | $ | 209 | $ | 173 | ||||
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are unavoidableand have been allocated to products based on sales dollars.
1. What is the total amount of traceable fixed manufacturingoverhead for each of the two products, Alpha and Beta? and What isthe companyâs total amount of common fixed expenses?
2. Assume that Cane expects to produce and sell 99,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer who is willing to buy 29,000 additional Alphasfor a price of $156 per unit. What is the financial advantage(disadvantage) of accepting the new customer's order?
3. Assume that Cane expects to produce and sell 109,000 Betasduring the current year. One of Caneâs sales representatives hasfound a new customer who is willing to buy 5,000 additional Betasfor a price of $82 per unit. What is the financial advantage(disadvantage) of accepting the new customer's order?
4. Assume that Cane expects to produce and sell 114,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer who is willing to buy 29,000 additional Alphasfor a price of $156 per unit; however pursuing this opportunitywill decrease Alpha sales to regular customers by 13,000 units.What is the financial advantage (disadvantage) of accepting the newcustomerâs order?
Related questions
Cane Company manufactures two products called Alpha and Betathat sell for $225 and $175, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 130,000 units of each product. Itsaverage cost per unit for each product at this level of activityare given below:
| Alpha | Beta | |||||||
| Directmaterials | $ | 42 | $ | 24 | ||||
| Direct labor | 42 | 32 | ||||||
| Variable manufacturingoverhead | 26 | 24 | ||||||
| Traceable fixed manufacturingoverhead | 34 | 37 | ||||||
| Variable selling expenses | 31 | 27 | ||||||
| Common fixed expenses | 34 | 29 | ||||||
| Total cost per unit | $ | 209 | $ | 173 | ||||
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are unavoidableand have been allocated to products based on sales dollars.
1. Assume that Cane normally produces and sells 109,000 Betasper year. What is the financial advantage (disadvantage) ofdiscontinuing the Beta product line. And Assume that Cane normallyproduces and sells 59,000 Betas per year. What is the financialadvantage (disadvantage) of discontinuing the Beta productline?
2. Assume that Cane normally produces and sells 79,000 Betas and99,000 Alphas per year. If Cane discontinues the Beta product line,its sales representatives could increase sales of Alpha by 12,000units. What is the financial advantage (disadvantage) ofdiscontinuing the Beta product line?
3. Assume that Cane expects to produce and sell 99,000 Alphasduring the current year. A supplier has offered to manufacture anddeliver 99,000 Alphas to Cane for a price of $156 per unit. What isthe financial advantage (disadvantage) of buying 99,000 units fromthe supplier instead of making those units?
4. Assume that Cane expects to produce and sell 74,000 Alphasduring the current year. A supplier has offered to manufacture anddeliver 74,000 Alphas to Cane for a price of $156 per unit. What isthe financial advantage (disadvantage) of buying 74,000 units fromthe supplier instead of making those units?
thank you
Assume that Caneâs customers would buy a maximum of 94,000 unitsof Alpha and 74,000 units of Beta. Also assume that the companyâsraw material available for production is limited to 228,000 pounds.If Cane uses its 228,000 pounds of raw materials, up to how muchshould it be willing to pay per pound for additional rawmaterials?
Cane Company manufactures two products called Alpha and Betathat sell for $190 and $155, respectively. Each product uses onlyone type of raw material that costs $8 per pound. The company hasthe capacity to annually produce 122,000 units of each product. Itsaverage cost per unit for each product at this level of activityare given below:
| Alpha | Beta | |||||||
| Directmaterials | $ | 40 | $ | 24 | ||||
| Direct labor | 34 | 28 | ||||||
| Variable manufacturingoverhead | 21 | 19 | ||||||
| Traceable fixed manufacturingoverhead | 29 | 32 | ||||||
| Variable selling expenses | 26 | 22 | ||||||
| Common fixed expenses | 29 | 24 | ||||||
| Total cost per unit | $ | 179 | $ | 149 | ||||
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are unavoidableand have been allocated to products based on sales dollars.
What contribution margin per pound of raw material is earned byeach of the two products?
Assume that Caneâs customers would buy a maximum of 94,000 unitsof Alpha and 74,000 units of Beta. Also assume that the companyâsraw material available for production is limited to 228,000 pounds.How many units of each product should Cane produce to maximize itsprofits?
Assume that Caneâs customers would buy a maximum of 94,000 unitsof Alpha and 74,000 units of Beta. Also assume that the companyâsraw material available for production is limited to 228,000 pounds.What is the maximum contribution margin Cane Company can earn giventhe limited quantity of raw materials?
