Cane Company manufactures two products called Alpha and Beta that sell for $210
ID: 2484216 • 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 expects to produce and sell 113,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 28,000 additional Alphas for a price of $152 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 13,000 units.
Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
Assume that Cane normally produces and sells 108,000 Betas per year. If Cane discontinues the Beta product line, how much will profits decrease?
Decrease by______
Assume that Cane normally produces and sells 58,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase?
Increase by______
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 98,000 Alphas during the current year. A supplier has offered to manufacture and deliver 98,000 Alphas to Cane for a price of $152 per unit. If Cane buys 98,000 units from the supplier instead of making those units, how much will 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?
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.)
[The following information applies to the questions displayed below.]Explanation / Answer
Solution:
Particulars Alpha Beta Total Sales 26,880,000 22,016,000 48,896,000 Less: Variable Expencess Direct Material 5,120,000 3,072,000 8,192,000 Direct Labour 4,864,000 4,352,000 9,216,000 Variable Mfg Expencess 3,200,000 2,944,000 6,144,000 Cariable Selling Expencess 3,840,000 3,328,000 7,168,000 Total Variable Expencess 17,024,000 13,696,000 30,720,0000 Contribution Margin 9,856,000 8,320,000 18,176,000 Less: Traceble Expencess 4,224,000 4,608,000 8,832,000 Less: Common Fixed Expencess 4,224,000 3,584,000 7,808,000 Total Fixed Ecepencess 8,448,000 8,192,000 16,640,000 Net Operating Income 14,08,000 1,28,000 15,36,000