Cane Company manufactures two products called Alpha and Beta that sell for $120
ID: 2562669 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 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.
What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line?
What is the company’s total amount of common fixed expenses?
Assume that Cane expects to produce and sell 80,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 10,000 additional Alphas for a price of $80 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?
Assume that Cane expects to produce and sell 90,000 Betas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 5,000 additional Betas for a price of $39 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?
Assume that Cane expects to produce and sell 95,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 10,000 additional Alphas for a price of $80 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 5,000 units.
Calculate the incremental net operating income if the order is accepted?
Assume that Cane normally produces and sells 90,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
Assume that Cane normally produces and sells 40,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
Assume that Cane normally produces and sells 60,000 Betas and 80,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 15,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?
Assume that Cane expects to produce and sell 80,000 Alphas during the current year. A supplier has offered to manufacture and deliver 80,000 Alphas to Cane for a price of $80 per unit. If Cane buys 80,000 units from the supplier instead of making those units, how much will profits increase or decrease?
Assume that Cane expects to produce and sell 50,000 Alphas during the current year. A supplier has offered to manufacture and deliver 50,000 Alphas to Cane for a price of $80 per unit. If Cane buys 50,000 units from the supplier instead of making those units, how much will profits increase or decrease?
How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta?
What contribution margin per pound of raw material is earned by Alpha and Beta?
Assume that Cane’s customers would buy a maximum of 80,000 units of Alpha and 60,000 units of Beta. Also assume that the company’s raw material available for production is limited to 160,000 pounds. How many units of each product should Cane produce to maximize its profits?
Assume that Cane’s customers would buy a maximum of 80,000 units of Alpha and 60,000 units of Beta. Also assume that the company’s raw material available for production is limited to 160,000 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 80,000 units of Alpha and 60,000 units of Beta. Also assume that the company’s raw material available for production is limited to 160,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials?
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its unit costs for each product at this level of activity are given below:
Explanation / Answer
Part 1 Alpha Beta Traceable fixed manufacturing overhead per Unit(A) 16 18 Units(B) 100000 100000 Total Amount of traceable fixed manufacturing overhead (A*B) 16,00,000 18,00,000 Part 2 Alpha Beta Common Fixed Expense per Unit(A) 15 10 Units(B) 100000 100000 Total Common Fixed Expense (A*B) 15,00,000 10,00,000 Part 3 Alpha Per Unit 80K Units Additional 10K @ 80 PU Revenue 120 96,00,000 8,00,000 Direct materials 30 24,00,000 3,00,000 Direct labor 20 16,00,000 2,00,000 Variable manufacturing overhead 7 5,60,000 70,000 Traceable fixed manufacturing overhead 16 12,80,000 1,60,000 Variable selling expenses 12 9,60,000 1,20,000 Common fixed expenses 15,00,000 - Profit/(Loss) 13,00,000 -50,000 Profit will decrease by $ 50000 Part 4 Beta Per Unit 90K Units Additional 5K @ 39 PU Revenue 80 72,00,000 1,95,000 Direct materials 12 10,80,000 Textbook Rental 60,000 Direct labor 15 13,50,000 75,000 Variable manufacturing overhead 5 4,50,000 25,000 Traceable fixed manufacturing overhead 18 16,20,000 90,000 Variable selling expenses 8 7,20,000 40,000 Common fixed expenses 10,00,000 - Profit/(Loss) 9,80,000 -95,000 Profit will decrease by $ 95000