[The following information applies to the questions displayed below. Cane Compan
ID: 2470466 • Letter: #
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[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 unit costs 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 Alpha Beta $40 $ 15 30 16 29 19 21 30 18 26 23 26 Total cost per unit $163 $130 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.Explanation / Answer
Income Statement Total Contribution Margin Format for the period ending Alpha Beta Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 117,000 117,000 Sales Revenue 175 20,475,000 135 15,795,000 36,270,000 Less Variable costs of Goods Direct Material Cost 40 4,680,000 15 1,755,000 6,435,000 Direct Labor cost 30 3,510,000 30 3,510,000 7,020,000 Variable Manufacturing Overhead 18 2,106,000 16 1,872,000 3,978,000 Variable cost of Goods Sold 88 10,296,000 61 7,137,000 17,433,000 Add Variable Selling & Admin Cost 23 2,691,000 19 2,223,000 4,914,000 Total Variable cost of Sales 111 12,987,000 80 9,360,000 22,347,000 Contribution Margin 64 7,488,000 55 6,435,000 13,923,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 26 3,042,000 29 3,393,000 6,435,000 Segment Operating Margin 38 4,446,000 26 3,042,000 7,488,000 Common Fixed Manufacturing Expenses 26 3,042,000 21 2,457,000 5,499,000 Net Operating Income 1,404,000 585,000 1,989,000 Alpha Beta 1 Total Traceable Fixed Manufacturing Overhead= 3,042,000 3,393,000 2 What is the company's total common fixed expenses= 5,499,000 3 Segment Profit -Alpha Income Statement Contribution Margin Format for the period ending Alpha Alpha Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 91,000 91,000 New Customer 21,000 Total Unit s 91,000 112,000 Sales Revenue 175 15,925,000 175 15,925,000 Sales Revenue New customer 124 2,604,000 Total Sales Revenue 15,925,000 18,529,000 Less Variable costs of Goods Direct Material Cost 40 3,640,000 40 4,400,000 Direct Labor cost 30 2,730,000 30 3,300,000 Variable Manufacturing Overhead 18 1,638,000 18 1,980,000 Variable cost of Goods Sold 88 8,008,000 88 9,680,000 Add Variable Selling & Admin Cost 23 2,093,000 23 2,576,000 Total Variable cost of Sales 111 10,101,000 111 12,256,000 Contribution Margin 64 5,824,000 56.01 6,273,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 3,042,000 3,042,000 Segment Operating Margin 2,782,000 3,231,000 So the segment margin will increase by $ 449,000 4 Segment Margin Beta Income Statement Contribution Margin Format for the period ending Beta Beta Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 101,000 101,000 New Customer 3,000 Total Unit s 101,000 104,000 Sales Revenue 135 13,635,000 135 13,635,000 Sales Revenue New customer 59 177,000 Total Sales Revenue 13,635,000 13,812,000 Less Variable costs of Goods Direct Material Cost 15 1,515,000 15 1,560,000 Direct Labor cost 30 3,030,000 30 3,120,000 Variable Manufacturing Overhead 16 1,616,000 16 1,664,000 Variable cost of Goods Sold 61 6,161,000 61 6,344,000 Add Variable Selling & Admin Cost 19 1,919,000 19 1,976,000 Total Variable cost of Sales 80 8,080,000 80 8,320,000 Contribution Margin 55 5,555,000 52.81 5,492,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 3,393,000 3,393,000 Segment Operating Margin 2,162,000 2,099,000 So the segment margin will decrease by $ 63,000 5 Segment Profit -Alpha Income Statement Contribution Margin Format for the period ending Alpha Alpha Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 106,000 96,000 New Customer 21,000 Total Unit s 106,000 117,000 Sales Revenue 175 18,550,000 175 16,800,000 Sales Revenue New customer 124 2,604,000 Total Sales Revenue 18,550,000 19,404,000 Less Variable costs of Goods Direct Material Cost 40 4,240,000 40 4,680,000 Direct Labor cost 30 3,180,000 30 3,510,000 Variable Manufacturing Overhead 18 1,908,000 18 2,106,000 Variable cost of Goods Sold 88 9,328,000 88 10,296,000 Add Variable Selling & Admin Cost 23 2,438,000 23 2,691,000 Total Variable cost of Sales 111 11,766,000 111 12,987,000 Contribution Margin 64 6,784,000 54.85 6,417,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 3,042,000 3,042,000 Segment Operating Margin 3,742,000 3,375,000 So the segment margin will decrease by $ 367,000 Based on the calculation the special order should not be accepted
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