9 The Foundational 15 [L012-2, LO12-3, LO12-4, L012-5, LO12-6] The following inf

Question

9 The Foundational 15 [L012-2, LO12-3, LO12-4, L012-5, LO12-6] 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 Part 9 of 15 26 oints Alpha Beta $ 30 15 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit 26 13 18 21 130 24 14 16 $102 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 Foundational 12-9 9. Assume that Cane expects to produce and sell 86,000 Alphas during the current year. A supplier has offered to manufacture and delver 86,000 Alphas to Cane for a price of $104 per unit. What is the financial advantage (disadvantage) of buying 86,000 units from the supplier instead of making those units? Financial (disadvantage) Financial advantage

Explanation / Answer

cost to purchase

86000

104

86000*104

8944000

cost to manufacture

7826000

direct material

86000*30

2580000

direct labor

86000*26

2236000

variable manufacturing overhead

86000*13

1118000

traceable fixed manufacturing overheads

86000*22

1892000

Difference in favor of continuing of Aplhas

1118000

Financial Disadvantage

1118000

cost to purchase

86000

104

86000*104

8944000

cost to manufacture

7826000

direct material

86000*30

2580000

direct labor

86000*26

2236000

variable manufacturing overhead

86000*13

1118000

traceable fixed manufacturing overheads

86000*22

1892000

Difference in favor of continuing of Aplhas

1118000

Financial Disadvantage

1118000

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