Cane Company manufactures two products called Alpha and Beta that sell for $170
ID: 2468384 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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.
rev: 07_09_2014_QC_51026, 07_11_2014_QC_51026, 08_14_2014_QC_52076, 08_18_2014_QC_52076, 08_27_2014_QC_52076, 09_03_2014_QC_52076, 09_09_2014_QC_52076
1.
value:
10.00 points
Required information
What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
2.
value:
10.00 points
Required information
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
3.
value:
10.00 points
Required information
Assume that Cane expects to produce and sell 90,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 20,000 additional Alphas for a price of $120 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
4.
value:
10.00 points
Required information
Assume that Cane expects to produce and sell 100,000 Betas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 3,000 additional Betas for a price of $49 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
5.
value:
10.00 points
Required information
Assume that Cane expects to produce and sell 105,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 20,000 additional Alphas for a price of $120 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 9,000 units.
Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
rev: 09_03_2014_QC_52076, 09_09_2014_QC_52076, 01_17_2015_QC_CS-629
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
6.
value:
10.00 points
Required information
Assume that Cane normally produces and sells 100,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
7.
value:
10.00 points
Required information
Assume that Cane normally produces and sells 50,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
8.
value:
10.00 points
Required information
Assume that Cane normally produces and sells 70,000 Betas and 90,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 14,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
9.
value:
10.00 points
Required information
Assume that Cane expects to produce and sell 90,000 Alphas during the current year. A supplier has offered to manufacture and deliver 90,000 Alphas to Cane for a price of $120 per unit. If Cane buys 90,000 units from the supplier instead of making those units, how much will profits increase or decrease?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
10.
value:
10.00 points
Required information
Assume that Cane expects to produce and sell 60,000 Alphas during the current year. A supplier has offered to manufacture and deliver 60,000 Alphas to Cane for a price of $120 per unit. If Cane buys 60,000 units from the supplier instead of making those units, how much will profits increase or decrease?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
11.
value:
10.00 points
Required information
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
12.
value:
10.00 points
Required information
What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.)
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
13.
value:
10.00 points
Required information
Assume that Cane’s customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the company’s raw material available for production is limited to 221,000 pounds. How many units of each product should Cane produce to maximize its profits?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
14.
value:
10.00 points
Required information
Assume that Cane’s customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the company’s raw material available for production is limited to 221,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?
References
eBook & Resources
WorksheetLearning Objective: 12-03 Prepare a make or buy analysis.Learning Objective: 12-06 Determine the value of obtaining more of the constrained resource.
Difficulty: 2 MediumLearning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted.
Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.Learning Objective: 12-05 Determine the most profitable use of a constrained resource.
Check my work
15.
value:
10.00 points
Required information
Assume that Cane’s customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the company’s raw material available for production is limited to 221,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)
Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 units of each product. Its unit costs for each product at this level of activity are given below:
Explanation / Answer
Income Statement Total Contribution Margin Format for the period ending Alpha Beta Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 116,000 116,000 Sales Revenue 170 19,720,000 130 15,080,000 34,800,000 Less Variable costs of Goods Direct Material Cost 30 3,480,000 18 2,088,000 5,568,000 Direct Labor cost 30 3,480,000 25 2,900,000 6,380,000 Variable Manufacturing Overhead 20 2,320,000 15 1,740,000 4,060,000 Variable cost of Goods Sold 80 9,280,000 58 6,728,000 16,008,000 Add Variable Selling & Admin Cost 22 2,552,000 18 2,088,000 4,640,000 Total Variable cost of Sales 102 11832000 76 8,816,000 20,648,000 Contribution Margin 68 7,888,000 54 6,264,000 14,152,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 26 3,016,000 28 3,248,000 6,264,000 Segment Operating Margin 42 4872000 26 3016000 7,888,000 Common Fixed Manufacturing Expenses 25 2,900,000 20 2,320,000 5,220,000 Net Operating Income 1,972,000 696,000 2,668,000 Alpha Beta 1 Total Traceable Fixed Manufacturing Overhead= 3,016,000 3,248,000 2 What is the company's total common fixed expenses= 5,220,000 3 Segment Profit -Alpha Income Statement Contribution Margin Format for the period ending Alpha Alpha Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 90,000 90,000 New Customer 20,000 Total Unit s 90,000 110,000 Sales Revenue 170 15,300,000 170 15,300,000 Sales Revenue New customer 120 2,400,000 Total Sales Revenue 15,300,000 17,700,000 Less Variable costs of Goods Direct Material Cost 30 2,700,000 30 3,300,000 Direct Labor cost 30 2,700,000 30 3,300,000 Variable Manufacturing Overhead 20 1,800,000 20 2,200,000 Variable cost of Goods Sold 80 7,200,000 80 8,800,000 Add Variable Selling & Admin Cost 22 1,980,000 22 2,420,000 Total Variable cost of Sales 102 9,180,000 102 11,220,000 Contribution Margin 68 6,120,000 58.91 6,480,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 3,016,000 3,016,000 Segment Operating Margin 3,104,000 3,464,000 So the segment margin will increase by $ 360,000 4 Segment Margin Beta Income Statement Contribution Margin Format for the period ending Beta Beta Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 100,000 100,000 New Customer 3,000 Total Unit s 100,000 103,000 Sales Revenue 130 13,000,000 130 13,000,000 Sales Revenue New customer 49 147,000 Total Sales Revenue 13,000,000 13,147,000 Less Variable costs of Goods Direct Material Cost 18 1,800,000 18 1,854,000 Direct Labor cost 25 2,500,000 25 2,575,000 Variable Manufacturing Overhead 15 1,500,000 15 1,545,000 Variable cost of Goods Sold 58 5,800,000 58 5,974,000 Add Variable Selling & Admin Cost 18 1,800,000 18 1,854,000 Total Variable cost of Sales 76 7,600,000 76 7,828,000 Contribution Margin 54 5,400,000 51.64 5,319,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 3,248,000 3,248,000 Segment Operating Margin 2,152,000 2,071,000 So the segment margin will decrease by $ 81,000 5 Segment Profit -Alpha Income Statement Contribution Margin Format for the period ending Alpha Alpha Details Amt $/Unit Total Amt $ Amt $/Unit Total Amt $ Activity Level 105,000 96,000 New Customer 20,000 Total Unit s 105,000 116,000 Sales Revenue 170 17,850,000 170 16,320,000 Sales Revenue New customer 120 2,400,000 Total Sales Revenue 17,850,000 18,720,000 Less Variable costs of Goods Direct Material Cost 30 3,150,000 30 3,480,000 Direct Labor cost 30 3,150,000 30 3,480,000 Variable Manufacturing Overhead 20 2,100,000 20 2,320,000 Variable cost of Goods Sold 80 8,400,000 80 9,280,000 Add Variable Selling & Admin Cost 22 2,310,000 22 2,552,000 Total Variable cost of Sales 102 10,710,000 102 11,832,000 Contribution Margin 68 7,140,000 59.38 6,888,000 Less Fixed costs Traceable Fixed Manufacturing Overhead 3,016,000 3,016,000 Segment Operating Margin 4,124,000 3,872,000 So the segment margin will decrease by $ 252,000