Just 8 short answers :) The following Information apples to the questions displa
ID: 2481720 • Letter: J
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Just 8 short answers :)
The following Information apples to the questions displayed below.] 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. value 1.00 points Required 1. What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line? Alpha Beta Traceable fixed manufacturing overheadExplanation / Answer
1) Traceable fixed manufacturing overhead for Alpha and Beta:
For Alpha = 29*122000 = $3,538,000
For Beta = 32*122000 = $3,904,000
2) Total amount of common fixed expenses:
= 29*122000 + 24*122000 = $6,466,000
3) Net Income will increase by $360,000
Calculaton:
Contribution for additional quantity = 136-121 = $15 per unit.
As there is not change in fixed costs, total contribution earned n the additional 24000 units is the increase in net income, which is equal to 24000*15 = 360000
4) Net Income will decrease by $93000
Calculation:
Contribution for the additional 3000 units = 62 - 93 = -$31 per unit.
Since contribution is negative profit will decrease by 31*3000 = 93000
5) Contribution per unit of Alpha = $69 (190- variable cost of 121) and per unit of Beta = $62 9155-93)
No of pounds used by 1 unit of Alpha = 5 and by one unit of Beta 3.
Hence contribution per pound of raw material
for Alpha 69/5 = $13.8 and for Beta 62/3 =$20.67
6) As Beta gives more contribution margin per unit of raw material consumed, it should be produced to the maximum extent.
Hence, 74000 units of Beta should be produced for which 74000*3 = 222000 pounds
Balance raw material of 6000 pounds (128000 - 122000) should be used for Alpha. No of units of Alpha that can be produced = 6000/5 = 1200 units.
7) Total contribution margin = 74000 of beta * unit contribution of 62 + 1200 units of Alpha * unit contribution of 69 = $4,670,800.
8) 74000 units of Beta would be produced with the available raw material and balance 6000 pounds would be used to produce 1200 units of Alpha. For the balance units (94000 - 1200) of Alpha to be produced the maximum price that can be paid per unit = existing price + contribution per pound of raw material for Alpha $8 + $13.8 = $21.8.
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