Cane Company manufactures two products called Alpha and Beta that sell for $165
ID: 2473466 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 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.
What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line?
Assume that Cane expects to produce and sell 89,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 19,000 additional Alphas for a price of $116 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?
Assume that Cane expects to produce and sell 99,000 Betas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 2,000 additional Betas for a price of $48 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?
Assume that Cane expects to produce and sell 104,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 19,000 additional Alphas for a price of $116 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 10,000 units.
Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
Assume that Cane normally produces and sells 99,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
Assume that Cane normally produces and sells 49,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
Assume that Cane normally produces and sells 69,000 Betas and 89,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 13,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?
Assume that Cane expects to produce and sell 89,000 Alphas during the current year. A supplier has offered to manufacture and deliver 89,000 Alphas to Cane for a price of $116 per unit. If Cane buys 89,000 units from the supplier instead of making those units, how much will profits increase or decrease?
Assume that Cane expects to produce and sell 59,000 Alphas during the current year. A supplier has offered to manufacture and deliver 59,000 Alphas to Cane for a price of $116 per unit. If Cane buys 59,000 units from the supplier instead of making those units, how much will profits increase or decrease?
What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.)
Assume that Cane’s customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume that the company’s raw material available for production is limited to 220,000 pounds. How many units of each product should Cane produce to maximize its profits?
Assume that Cane’s customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume that the company’s raw material available for production is limited to 220,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?
Assume that Cane’s customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume that the company’s raw material available for production is limited to 220,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)
Alpha Beta Direct materials $ 40 $ 24 Direct labor 29 25 Variable manufacturing overhead 15 14 Traceable fixed manufacturing overhead 25 27 Variable selling expenses 21 17 Common fixed expenses 24 19 Total cost per unit $ 154 $ 126
Explanation / Answer
AlphaBeta
Traceable Fixed Manufacturing Overhead cost per unit $25$27
Annual Production capacity113,000113,000
Traceable Fixed Manufacturing Overhead cost$2,825,000$3,051,000
Annual Production capacity = 113,000 units
Total Common fixed expenses per unit = $43 (24+19)
Total Amount of Common fixed expenses = $4,859,000
3. If order accepts, then increase or decrease in profit.
New order
Sale order
19000 units
Selling price
116 per units
Sale revenue
2,204,000
Less:
Direct material
760,000
Direct labor
551,000
Variable Manufacturing Overhead
285,000
Variable selling expenses
399,000
Contribution Margin
209,000
Profit will increased by $209,000
4. If order accepts, then increase or decrease in profit.
New order
Sale order
2000 units
Selling price
48 per unit
Sale revenue
96,000
Less:
Direct material
48,000
Direct labor
50,000
Variable Manufacturing Overhead
28,000
Variable selling expenses
34,000
Contribution Margin
(64,000)
Profit will Decreased by $64,000
5a. If order accepts, then increase or decrease in profit.
New order
Regular
Sale order
19000 units
10000 units
Selling price
116 per units
165 per unit
Sale revenue
2,204,000
1,650,000
Less:
Direct material
760,000
400,000
Direct labor
551,000
290,000
Variable Manufacturing Overhead
285,000
150,000
Variable selling expenses
399,000
210,000
Contribution Margin
209,000
600,000
Net Operating Profit will Decreased by $391,000
5b. No, Special order cannot be accepted, because it will decrease net operating income
6. If Beta production line stopped
Alpha
If beta stopped, than alpha
Common Fixed expenses
2,712,000
4,859,000
Increment in Operating cost is $2,147,000 ($4859000 - $2712000)
Decrease in Profit $2,147,000
11. Total Unit cost of raw material = $40
Raw material cost per pound = $8
Than 5 pounds of raw material required per each unit of Alpha.
Total Unit cost of raw material = $24
Raw material cost per pound = $8
Total Unit cost of raw material = $40
Raw material cost per pound = $8
Than 5 pounds of raw material required per each unit of Alpha.
12. Contribution Margin per unit AlphaBeta
Selling Price$165$130
Less:
Direct material$40$24
Direct Labor$29$25
Variable manu overhead$15$14
Variable Selling overhead$21$17
Contribution margin$60$50
3. If order accepts, then increase or decrease in profit.
New order
Sale order
19000 units
Selling price
116 per units
Sale revenue
2,204,000
Less:
Direct material
760,000
Direct labor
551,000
Variable Manufacturing Overhead
285,000
Variable selling expenses
399,000
Contribution Margin
209,000
Profit will increased by $209,000
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