Cane Company manufactures two products called Alpha and Beta that sell for $210

Question

Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 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.

Assume that Cane normally produces and sells 108,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

Assume that Cane normally produces and sells 58,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

Assume that Cane normally produces and sells 78,000 Betas and 98,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

Assume that Cane expects to produce and sell 98,000 Alphas during the current year. A supplier has offered to manufacture and deliver 98,000 Alphas to Cane for a price of $152 per unit. If Cane buys 98,000 units from the supplier instead of making those units, how much will profits increase or decrease?

Assume that Cane expects to produce and sell 73,000 Alphas during the current year. A supplier has offered to manufacture and deliver 73,000 Alphas to Cane for a price of $152 per unit. If Cane buys 73,000 units from the supplier instead of making those units, how much will profits increase or decrease?

Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its unit costs for each product at this level of activity are given below:

Explanation / Answer

Cane Company manufactures two products called Alpha and Beta that sell for $210

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