The Foundational 15 [LO12-2, LO12-3, LO12-4, LO12-5, LO12-6 [The following infor

Question

The Foundational 15 [LO12-2, LO12-3, LO12-4, LO12-5, LO12-6 [The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta s 24 30 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit $ 40 37 24 3 2 29 32 $194 35 25 27 $163 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 12-1 Required 1. What is the total amount of traceable fixed manufacturing overhead for each of the two products? Alpha Beta Traceable fixed manufacturing overhead

Explanation / Answer

Part 1 - Calculation of Traceable Fixed Cost

Part 2 - Common Fixed Expenses

Part 3 - Decision on New offer (Alpha)

Total Variable cost for offer of 27000 units

Calculation of effect on profit on new offer decision

Decision = offer should be accepted

Part 4 - Decision on New offer (Beta)

Total Variable cost for offer of 4000 units

Calculation of Effect on profit on new offer decision

Decision = offer should be rejected.

Particulars Alpha Beta Annual Production (A) 127000 127000 Traceable Fixed Manufacturing overhead per unit (B) $32 $35 Total Traceable Fixed Manufacturing Overhead (A*B) $4064000 $4445000

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