. Verizon LTE 98% 9:41 AM ezto.mheducation.com [The following information applie
ID: 2510443 • Letter: #
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. Verizon LTE 98% 9:41 AM ezto.mheducation.com [The following information applies to the questions displayed below.] 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: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Alpha Beta $40 $24 38 34 25 23 33 36 30 26 33 28 Total cost per unit 199 171 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
Basic Details Full capacity- 128000 128000 Alpha Beta Selling price 210 172 Less: Variable costs: Direct Materials 40 24 Direct Labor 38 34 VMOH 25 23 VSOH 30 26 Total 133 107 Contribution/unit 77 65 Less: Avoidable FMOH 33 36 Unavoidable 33 28 Total 66 64 Net Profit 11 1 5… Incremental contribution(152-133)*28000 532000 Less: Sale value lost(13000*210) -2730000 Add: Variable costs saved(13000*133) 1729000 Incl. fixed mfg.OH incurred(28000-13000)*33 -495000 Incremental NOI -964000 6.. Normally produces 108000 Betas Discontinuing Beta line Contribution loss(108000*65) -7020000 Savings in avoidable FMOH(36*108000) 3888000 Net Decrease -3132000 Profits will DECREASE by 3132000 7.. Normally produces 58000 Betas Discontinuing Beta line Contribution loss(58000*65) -3770000 Savings in avoidable FMOH(36*58000) 2088000 Net Decrease -1682000 Profits will DECREASE by 1682000 8.. Normally produces 78000 Betas Discontinuing Beta line Contribution loss(78000*65) -5070000 Savings in avoidable FMOH(36*78000) 2808000 Net Decrease -2262000 Add: Contribution from Alpha(77*11000) 847000 Less: Addl FMOH(33*11000) -363000 Net Decrease -1778000 Profits will DECREASE by 1778000 Per unit details To buy 152 To make(40+38+25+33) 136 Loss on buying 16 Total(98000*16) 1568000 Profit will DECREASE by 1568000
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