The following Information applies to the questions displayed below.j Cane Compan
ID: 2578998 • Letter: T
Question
The following Information applies to the questions displayed below.j Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively Each product uses only one type of raw materlal that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its unit costs for each product at this level of activity are given below Direct materlals Direct labor Varlable manufacturing overhead Traceable fixed manufacturing overhead Varlable selling expenses Common fixed expenses Alpha Beta $40 $ 24 28 19 32 21 29 26 29 Total cost per unit $179 $149 The company conslders its traceable fixed manufacturing overhead to be avoldable, whereas Its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.Explanation / Answer
6) Production and sales units of Beta = 104000 Selling price of Beta = $155 Total variable cost per unit of Beta = 24+28+19+22 = $93 Contribution margin per unit = 155-93 = $62 Total contribution margin = 104000*$62 = $9672000 Total fixed costs of Beta = (32+24)*122000 = $6832000 Total profits of Beta = 9672000-6832000 = $2840000 Total unavoidable fixed costs of Beta = 24*122000 = $2928000 If Cane discontinues the Beta product line, then the profits will decrease by $5768000 (2840000+2928000) 7) Production and sales units of Beta = 54000 Selling price of Beta = $155 Total variable cost per unit of Beta = 24+28+19+22 = $93 Contribution margin per unit = 155-93 = $62 Total contribution margin = 54000*$62 = $3348000 Total fixed costs of Beta = (32+24)*122000 = $6832000 Total profits(loss) of Beta = 3348000-6832000 = (-$3484000) Total unavoidable fixed costs of Beta = 24*122000 = $2928000 If Cane discontinues the Beta product line, then the profits will increase by $556000 (34840000+2928000) 8) Production and sales units of Beta = 74000 Selling price of Beta = $155 Total variable cost per unit of Beta = 24+28+19+22 = $93 Contribution margin per unit = 155-93 = $62 Total contribution margin = 74000*$62 = $4588000 Total fixed costs of Beta = (32+24)*122000 = $6832000 Total profits(loss) of Beta = 4588000-6832000 = (-$2244000) Total unavoidable fixed costs of Beta = 24*122000 = $2928000 Selling price of Alpha = $179 Total variable cost per unit of Alpha = 40+34+21+26 = $121 Contribution margin per unit = 179-121 = $58 Total contribution margin for additional units of 14000= 14000*$58 = $812000 If Cane discontinues the Beta product line, then the profits will increase by $128000 (812000-(2928000-2244000)) 9) Production and sales units of Alpha = 94000 Total variable cost per unit of Alpha = 40+34+21+26 = $121 Total variable costs of Alpha = $121*94000 = $11374000 Total unavoidable fixed costs = 29*122000 = $3538000 Total production costs of producing 94000 Alphas = $14912000 (11374000+3538000) Purchase cost per unit Alpha = $136 Total purchase costs = $136*94000 = $12784000 Total unavoidable fixed costs of Alpha = 29*122000 = $3538000 Total effective costs of purchase option = $16322000 (12784000+3538000) If Cane buys 94000 units from supplier, then the total profits will decrease by $1410000 (16322000-14912000) 10) Production and sales units of Alpha = 69000 Total variable cost per unit of Alpha = 40+34+21+26 = $121 Total variable costs of Alpha = $121*69000 = $8349000 Total unavoidable fixed costs = 29*122000 = $3538000 Total production costs of producing 69000 Alphas = $11887000 (8349000+3538000) Purchase cost per unit Alpha = $136 Total purchase costs = $136*69000 = $9384000 Total unavoidable fixed costs of Alpha = 29*122000 = $3538000 Total effective costs of purchase option = $12922000 (9384000+3538000) If Cane buys 69000 units from supplier, then the total profits will decrease by $1035000 (12922000-11887000)