Cane Company manufactures two products called Alpha and Beta that sell for $225
ID: 2523541 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. Its unit costs for each product at this level of activity are given below:
9. Assume that Cane expects to produce and sell 99,000 Alphas during the current year. A supplier has offered to manufacture and deliver 99,000 Alphas to Cane for a price of $156 per unit. If Cane buys 99,000 units from the supplier instead of making those units, how much will profits increase or decrease?
10. Assume that Cane expects to produce and sell 74,000 Alphas during the current year. A supplier has offered to manufacture and deliver 74,000 Alphas to Cane for a price of $156 per unit. If Cane buys 74,000 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 $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. Its unit costs for each product at this level of activity are given below:
Explanation / Answer
Relavent costs = Direct materials + Direct labour + Variable manufacturing overhead
= 42 + 42 + 26
= 110
9.
Cost of Alphas are produced = 99,000 units * 110 per unit
= 10,890,000
Cost of Alphas if purchased = 99,000 units * 156 per unit
= 15,444,000
Profits decrease by 4,554,000 (15,444,000 - 10,890,000)
10.
Cost of Alphas if produced = 74,000 units * 110 per unit
= 8,140,000
Cost of Alphas if purchased = 74,000 units * 156 per unit
= 11,544,000
Profits decrease by 3,404,000 (11,544,000 - 8,140,000)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.