uses only one type ofe h ults of each product. ts everage cost per unit for each
ID: 2410184 • Letter: U
Question
uses only one type ofe h ults of each product. ts everage cost per unit for each product at this level of actvity are given below Alpha Beta 30 21 $12 20 materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead variable selling expenses Common fixed expenses Total cost per unit 17 13 16 19 $105 $77 The company considers its traceable fxed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars 5. Assume tat Care expects to produce and sell 96000 A?phas during the current yea. One of Cane's sales representatives has fond? ew customer who is w ling to buy n additional Alphas for a price of $84 per ur t however pursuing his opportunity wil decrease Alipha sales to regular customers by 6,000 units. a. What is the financial advantage (disadvantage) of accepting the new customer's order? b. Based on your calculations above should the special order be accepted? Complete this question by entering your answers in the tabs below What is the financial advantage (disadvantage) of accepting the new customer's order? c Prev escExplanation / Answer
Solution 5:
As there is net financial disadvantage of $186,000, therefore special order should not be accepted.
Solution 6:
Financial disadvantge of discontinuing beta line = $1,539,000
Solution 7:
Financial advantge of discontinuing beta line = $361,000
Solution 8:
Financial advantge of discontinuing beta line = $449,000
Solution 9:
Financial disadvantage of buying instead of making = $308,000
Solution 10:
Financial advantage of buying instead of making = $442,000
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Differential Analysis - Regular sale alpha (alt 1)or accept special alpha order (Alt2) Particulars Regular Sale (96000 Units)(Alt 1) Accept special alpha order (Regular Sale - 90000 Units, Special Order - 11000 Units) Differential effect on income (Alt 2) Details Amount Details Amount Revenue 96000*$125 $12,000,000.00 (90000*$125) + (11000*84) $12,174,000.00 $174,000.00 Costs: Direct Material 96000*$30 $2,880,000.00 101000*$30 $3,030,000.00 $150,000.00 Direct Labor 96000*$21 $2,016,000.00 101000*$21 $2,121,000.00 $105,000.00 Variable manufacturing Overhead 96000*$8 $768,000.00 101000*$8 $808,000.00 $40,000.00 Variable Selling Expenses 96000*$13 $1,248,000.00 101000*$13 $1,313,000.00 $65,000.00 Traceable Fixed manufacturing overhead 101000*$17 $1,717,000.00 101000*$17 $1,717,000.00 $0.00 Common fixed expenses 101000*$16 $1,616,000.00 101000*$16 $1,616,000.00 $0.00 Income / (Loss) $1,755,000.00 $1,569,000.00 -$186,000.00
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