The following information applies to the quesions displayed below Cane Compeny m

Question

The following information applies to the quesions displayed below Cane Compeny manufectures two products called Alpha and Beta that sell for $120 and $80, respectively Each product uses only one type of rew material thet costs $6 per pound. The company has the capacity to annuamy produce ?00.000 units of each product is unt costs for each product at this level or aany are given below Direct matenals Direct labor $30 $ 12 Variable manufacturing overhead Traceable txed manufacturing overheed Varable selling expenses Common fixed expenses 15 10 Total cost per unt $100 $68 The company considers ns traceable fixed manufacturing overheed to be avoidable, whereas its common ftxed expenses are deemed unavoldable and have been allocated to products based on sales dollars. O Type here to search 5 6 8 WER SDF GH

Explanation / Answer

5a.

Incremental net operating income = -145,000

Explanations and calculations:

b. As incremental income is <0, the answer is - "no"

6.

Thus profit will decrease by $1,800,000

Explanations: Lost revenue = 90,000*80 = 7,200,000

Lost variable costs = 90,000*(12+15+5+8) = 3,600,000

Lost tracebale fixed costs = 100,000*18 = 1,800,000

7.

Thus profit will increase by $200,000

8.

Thus profit will increase by $165,000

Additional revenue $        800,000 additional variable relevant costs:          (690,000) decrease in revenue          (600,000) decrease in expenses             345,000 $      (145,000)

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