The following Information applies to the questions displayed below.j Cane Compan
ID: 2579868 • 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. Profit decreases by $2544000
8. Profit increases by $282000
9. Profit decreases by $316000
The selling price and variable selling expenses will not change with the alternatives and hence are irrelevant. Common fixed expenses are unavoidable and hence irrelevant as they too will not change with the alternatives.
10. Profit increases by $709000
Beta Per unit $ Total $ Sales 155 16120000 Less: Variable costs Direct materials 24 2496000 Direct labor 28 2912000 Manufacturing overhead 19 1976000 Selling expenses 22 2288000 Total variable costs 93 9672000 Contribution margin 62 6448000 Less: Traceable fixed manufacturing overhead 32 3904000 (122000 x $32) Profit 2544000