please be descriptive for I need to know how to do this. Cane Company manufactur
ID: 2519016 • Letter: P
Question
please be descriptive for I need to know how to do this.
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.
1.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?
2.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?
3.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?
4.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?
5.How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta?
6.
What contribution margin per pound of raw material is earned by Alpha and Beta
7.Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 pounds. How many units of each product should Cane produce to maximize its profits
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
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1.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? Contribution Lost if Beta Product Line closed 65 Per unit (172-24-34-23-26) Contribution Lost of 108000 Units -7020000 Less: Traceable Fixed Manufacturin Overhead 4608000 (36*128000) Decrease in profit if Beta is dropped -2412000 2.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? Contribution Lost of 58000 Units -3770000 Less: Traceable Fixed Manufacturin Overhead 4608000 (36*128000) Increase in profit if Beta is dropped 838000 3.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? Contribution Lost of 78000 Units -5070000 Less: Traceable Fixed Manufacturin Overhead 4608000 Add: Additional Contribution from Sale of Alpha 847000 11000*(210-40-38-25-30) Increase in profit if Beta is dropped 385000 4.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? Make Buy Cost of purchasing 73000*152 11096000 Direct Material 73000*40 2920000 Direct Labor 73000*38 2774000 Variable Overhead 73000*25 1825000 Traceable Fixed Overhead 128000*33 4224000 Total Cost 11743000 11096000 Profit will increase by 11743000-11096000=$647000 5.How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta? Alpha Beta Direct Material Cost 40 24 Cost per pound 8 8 Pound material needed for one unit 5 3 (Direct Material Cost/Cost per pound) 6. What contribution margin per pound of raw material is earned by Alpha and Beta Alpha Beta Contribution Margin per unit 77 65 Pound material needed for one unit 5 3 Contribution Margin per pound of RM 15.4 21.7 7.Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 pounds. How many units of each product should Cane produce to maximize its profits Since Contribution Margin per pound of RM for Beta is more, should produce Beta maximum. Material per unit Units Produced Total Pounds Beta 3 78000 234000 Alpha 5 2800 14000 (248000-234000) (14000/5)Related Questions
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