Cane Company manufactures two products called Alpha and Beta that sell for $130

Question

Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 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.

Alpha Beta   Direct materials $ 25 $ 10   Direct labor 22 21   Variable manufacturing overhead 17 7   Traceable fixed manufacturing overhead 18 20   Variable selling expenses 14 10   Common fixed expenses 17 12   Total cost per unit $ 113 $ 80

Explanation / Answer

Answer Alpha Manfacturing Buying Rate Unit 82000 82000 Sales 130 10660000 10660000 Direct Material 25 2050000 0 Direct labour 22 1804000 0 Variable Mfg Overhead 17 1394000 0 Tracaeable Fixed Mfg Overhead 18 1476000 0 Buying cost 88 0 7216000 Contribution 3936000 3444000 Variable selling exp 14 1148000 1148000 Common Fixed Exp 17 1394000 1394000 Net Profit 1394000 902000 Net Profit in decrease = 1394000-902000 = $ 492000 Answer 2 Alpha Manfacturing Buying Rate Unit 52000 52000 Sales 130 6760000 6760000 Direct Material 25 1300000 0 Direct labour 22 1144000 0 Variable Mfg Overhead 17 884000 0 Tracaeable Fixed Mfg Overhead 18 936000 0 Buying cost 88 0 4576000 Contribution 2496000 2184000 Variable selling exp 14 728000 728000 Common Fixed Exp 17 884000 884000 Net Profit 884000 572000 Net Profit Decrease = 884000-572000 = $ 312000

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