Cane Company manufactures two products called Alpha and Beta that sell for $210
ID: 2475028 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 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.
Assume that Cane normally produces and sells 58,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
Assume that Cane normally produces and sells 78,000 Betas and 98,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?
Assume that Cane expects to produce and sell 73,000 Alphas during the current year. A supplier has offered to manufacture and deliver 73,000 Alphas to Cane for a price of $152 per unit. If Cane buys 73,000 units from the supplier instead of making those units, how much will profits increase or decrease?
What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.)
Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 pounds. How many units of each product should Cane produce to maximize its profits?
Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?
Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 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 $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its unit costs for each product at this level of activity are given below:
Explanation / Answer
7. Calculation of loss of profit due to dicontinuance of beta
Total profit to be lost = 58000x29 = $1682000
Profit will decrease by $1682000
8.
Calculation of profitability from alpha
Loss of profit due to discontinuance of beta = 78000x29 = 2262000
Increse in profit due to addtional sale of 11000 Alphas = 44x11000
= 484000
Net decrese in profit = 2262000-484000
= 1778000
10 Manufacturing cost per unit of cane = 40+38+25+33 = 136
Purchase cost = 152
Excess cost = 152-136 =16
Decrease in profit = 73000x16 = 1168000
12.Statement showing per pound oh raw material
13. Statement showing units to be produced
14. Maximum Contribution Margin = 78000x65 + 2800x77
= $5285600
Sales price per unit 172 Less: Direct material 24 Less: Direct labour 34 Less: Traceable fixed manufacturing cost 36 Less: Variable manufacturing cost 23 Less: Variable selling expenses 26 Net beneft per unit 29