Cane Company manufactures two products called Alpha and Beta that sell for $170
ID: 2468407 • 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.
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.)
References
eBook & Resources
[The following information applies to the questions displayed below.]Explanation / Answer
Since, there are multiple parts to the question, the first four have been answered.
_________
Part 5)
a)
The incremental profit/loss is calculated with the use of following table:
The net operating income would decrease by $252,000 if the offer is accepted.
_________
Part 5)
b)
No, the special order shoudn't be accepted.
_________
Part 6)
The increase/decrease in profits is calculated with the use of following table:
The profits will decrease by $2,152,000 if Beta is discontinued.
_________
Part 7)
The increase/decrease in profits is calculated with the use of following table:
The profits will increase by $548,000 if beta is discontinued.
_________
Part 8)
The increase/decrease in profits is calculated with the use of following table:
The profits will increase by $420,000 if Beta is discontinued.
Incremental Sales (20,000*120) 2,400,000 Less Variable Costs Direct Material (20,000*30) 600,000 Direct Labor (20,000*30) 600,000 Variable Manufacturing Overhead (20,000*20) 400,000 Variable Selling Expenses (20,000*22) 440,000 Incremental Total Variable Cost 2,040,000 Loss of Contribution Margin from Regular Customers [9,000*(170 – 30 – 30 – 20 – 22)] 612,000 Incremental Net Operating Income -$252,000