Cane Company manufactures two products called Alpha and Beta that sell for $240
ID: 2533798 • Letter: C
Question
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 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.
9. Assume that Cane expects to produce and sell 100,000 Alphas during the current year. A supplier has offered to manufacture and deliver 100,000 Alphas to Cane for a price of $160 per unit. If Cane buys 100,000 units from the supplier instead of making those units, how much will profits increase or decrease?
Profit: increase/decreases by ______________
10. Assume that Cane expects to produce and sell 75,000 Alphas during the current year. A supplier has offered to manufacture and deliver 75,000 Alphas to Cane for a price of $160 per unit. If Cane buys 75,000 units from the supplier instead of making those units, how much will profits increase or decrease?
Profit: increase/decreases by ______________
11. How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta?
Pounds of raw material per unit: Alpha:_____________ Beta:_______________
12. What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.)
Contribution margin per pound: Alpha:____________ Beta:__________________
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 unit costs for each product at this level of activity are given below:
Explanation / Answer
9 Option1: Make No. of Units 100000 Per Unit Amount Selling Price 240 24,000,000.00 Direct materials 35 3,500,000.00 Direct labor 48 4,800,000.00 Variable manufacturing overhead 27 2,700,000.00 Traceable fixed manufacturing overhead 35 3,500,000.00 Variable selling expenses 32 3,200,000.00 Common fixed expenses 4,585,000.00 Net Income 1,715,000.00 No. of Units 100000 Option2:Buy Per Unit Amount Selling Price 240 24,000,000.00 Cost per unit 160 16,000,000.00 Common Fixed Expenses 4,585,000.00 Net Income 3,415,000.00 Excess Net Income Over Buy 1,700,000.00 Therefore, If we buy profit will Increase Buy $ 1,700,000. 10 Option1: Make No. of Units 75000 Per Unit Buy Selling Price 240 18,000,000.00 Direct materials 35 2,625,000.00 Direct labor 48 3,600,000.00 Variable manufacturing overhead 27 2,025,000.00 Traceable fixed manufacturing overhead 35 2,625,000.00 Variable selling expenses 32 2,400,000.00 Common fixed expenses 4,585,000.00 Net Income 140,000.00 Option2: Buy No. of Units 75000 Option2:Buy Per Unit Amount Selling Price 240 18,000,000.00 Cost per unit 160 12,000,000.00 Common Fixed Expenses 4,585,000.00 Net Income 1,415,000.00 Excess Net Income Over Buy 1,275,000.00 Therefore, If we buy profit will Increase Buy $ 1,275,000 11 Alpha Beta Direct materials 35 15 Raw Material Cost 5 5 Pounds of raw material per unit 7 3 12 Alpha Beta Direct materials 35.00 15.00 Direct labor 48.00 23.00 Variable manufacturing overhead 27.00 25.00 Total variable costs 110.00 63.00 Alpha Beta Selling Price 240.00 162.00 Total variable costs 110.00 63.00 Contribution Per Unit 130.00 99.00 Raw Material Cost 5.00 5.00 Contribution margin per pound 26 19.8
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