Required information The Foundational 15 [LO12-2, LO12-3, LO12-4, L012-5, LO12-6

Question

Required information The Foundational 15 [LO12-2, LO12-3, LO12-4, L012-5, LO12-6] The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses $ 35 48 27 35 32 35 $212 Beta $ 15 23 25 38 28 30 Total cost per unit $159 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars

Explanation / Answer

Solution 5:

As there is net financial disadvantage of $832,000, therefore special order should not be accepted.

Solution 6:

Solution 7:

Solution 7:

Solution 9:

Differential Analysis - Regular sale alpha (alt 1)or accept special alpha order (Alt2) Particulars Regular Sale (115000 Units)
(Alt 1) Accept special alpha order (Regular Sale - 101000 Units, Special Order - 30000 Units) Differential effect on income (Alt 2) Details Amount Details Amount Revenue 115000*$240 $27,600,000.00 (101000*$240) + (30000*160) $29,040,000.00 $1,440,000.00 Costs: Direct Material 115000*$35 $4,025,000.00 131000*$35 $4,585,000.00 $560,000.00 Direct Labor 115000*$48 $5,520,000.00 131000*$48 $6,288,000.00 $768,000.00 Variable manufacturing Overhead 115000*$27 $3,105,000.00 131000*$27 $3,537,000.00 $432,000.00 Variable Selling Expenses 115000*$32 $3,680,000.00 131000*$32 $4,192,000.00 $512,000.00 Traceable Fixed manufacturing overhead 131000*$35 $4,585,000.00 131000*$35 $4,585,000.00 $0.00 Common fixed expenses 131000*$35 $4,585,000.00 131000*$35 $4,585,000.00 $0.00 Income / (Loss) $2,100,000.00 $1,268,000.00 -$832,000.00

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