Cane Company manufactures two products called Alpha and Beta that sell for $190
ID: 2451159 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its unit costs for each product at this level of activity are given below:
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.
Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its unit costs for each product at this level of activity are given below:
Explanation / Answer
Fixed common cost is based on sales dollar values
hence for Alpha = 29/190 = 15.2631578% of sales
Beta = 24/155 = 15.4838709% of sales
Total sales
Common fixed cost
Alpha 122,000@190 $23,180,000 Beta 122,000@155 $18,910,000Related Questions
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