Required information [The following information applies to the questions display

Question

Required information [The following information applies to the questions displayed below. Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 108,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta 15 30 26 13 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit 24 14 16 $102 18 $130 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 4. Assume that Cane expects to produce and sell 96,000 Betas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 2,000 additional Betas for a price of $45 per unit. What is the financial advantage (disadvantage) of accepting the new customers order? Financial (disadvantage) Financial advantage

Explanation / Answer

4)Variable costs of beta=15+22+11+14=62
selling price per unit=45
so the net loss per unit=45-62=17
financial disadvantage and by 17*2000=34000

6)contribution margin of beta=selling rpice -variable costs
=110-62=48
total contribution margin=86000*48=4128000(cash outflow)
Traceable fixed mfg overhead=24*108000=2592000(cash inflow)
Decrease in net operatign income=2592000-4128000=-1536000
financial disadvantage by 1536000

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