Cane Company manufactures two products called Alpha and Beta that sell for $180
ID: 2591293 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $180 and $145, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Beta $ 24 Alpha Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable aelling expensea Common fixed expenses Total cost per unit S 36 32 19 30 20 24 27 $165 $140 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. Foundational 12-4 4. Assume that Cane expects to produce and sell 102,000 Betas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 4,000 additional Betas for a price of $60 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order? inancial (disadvantage) 9. Assume that Cane expects to produce and sell 92,000 Alphas during the current year. A supplier has offered to manufacture and deliver 92,000 Alphas to Cane for a price of $128 per unit. What is the financial advantage (disadvantage) of buying 92,000 units from the supplier instead of making those units? nancial (disadvantage) 10. Assume that Cane expects to produce and sell 62,000 Alphas during the current year. A supplier has offered to manufacture and deliver 62.000 Alphas to Cane for a price of $128 per unit. What is the financial advantage (disadvantage) of buying 62,000 units from the supplier instead of making those units? nancial advantage 14. Assume that Cane's customers would buy a maximum of 92,000 units of Alpha and 72,000 units of Beta. Also assume that the company's raw material available for production is limited to 300,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials? 15. Assume that Cane's customers would buy a maximum of 92,000 units of Alpha and 72,000 units of Beta. Also assume that the company's raw material available for production is limited to 300,000 pounds. If Cane uses its 300,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)Explanation / Answer
4. Financial (disadvantage): ($112000)
Traceable fixed manufacturing overhead and common fixed expenses are irrelevant as the same would be incurred whether the new customer's order is accepted or not.
9. Financial (disadvantage): $(586000)
The selling price and variable selling expenses will not change with the alternatives and hence are irrelevant. Common fixed expenses are unavoidable and hence irrelevant as they too will not change with the alternatives.
10. Financial advantage: $644000
The selling price and variable selling expenses will not change with the alternatives and hence are irrelevant. Common fixed expenses are unavoidable and hence irrelevant as they too will not change with the alternatives.
14. Total contribution margin: $4242000
Since contribution margin per pound of raw material is higher for Beta, the maximum demand of 72000 units of Betas will be fulfilled first. Balance raw material remaining will be used for producing Alphas.
Per Chegg guidelines, 4 sub-parts have been answered.
Beta Per unit $ Sales 60 Less: Variable costs Direct materials 24 Direct labor 27 Manufacturing overhead 17 Selling expenses 20 Total variable costs 88 Contribution per unit $ -28 Number of units ordered 4000 Profit on new customer's order $ -112000Related Questions
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