1. What is the total amount of traceable fixed manufacturing overhead for each o
ID: 2586733 • Letter: 1
Question
1. What is the total amount of traceable fixed manufacturing overhead for each of the two products? Alpha? Beta?
2. What is the company’s total amount of common fixed expenses?
3. Assume that Cane expects to produce and sell 83,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 13,000 additional Alphas for a price of $92 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?
4. Assume that Cane expects to produce and sell 93,000 Betas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 4,000 additional Betas for a price of $42 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?
5. Assume that Cane expects to produce and sell 98,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 13,000 additional Alphas for a price of $92 per unit; however pursuing this opportunity will decrease Alpha 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?
6. Assume that Cane normally produces and sells 93,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
7. Assume that Cane normally produces and sells 43,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
8. Assume that Cane normally produces and sells 63,000 Betas and 83,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 18,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
9. Assume that Cane expects to produce and sell 83,000 Alphas during the current year. A supplier has offered to manufacture and deliver 83,000 Alphas to Cane for a price of $92 per unit. What is the financial advantage (disadvantage) of buying 83,000 units from the supplier instead of making those units?
10. Assume that Cane expects to produce and sell 53,000 Alphas during the current year. A supplier has offered to manufacture and deliver 53,000 Alphas to Cane for a price of $92 per unit. What is the financial advantage (disadvantage) of buying 53,000 units from the supplier instead of making those units?
11. How many pounds of raw material are needed to make one unit of each of the two products?
12. What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.)
13. Assume that Cane’s customers would buy a maximum of 83,000 units of Alpha and 63,000 units of Beta. Also assume that the company’s raw material available for production is limited to 200,000 pounds. How many units of each product should Cane produce to maximize its profits? Alpha? Beta?
14. Assume that Cane’s customers would buy a maximum of 83,000 units of Alpha and 63,000 units of Beta. Also assume that the company’s raw material available for production is limited to 200,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?
15. Assume that Cane’s customers would buy a maximum of 83,000 units of Alpha and 63,000 units of Beta. Also assume that the company’s raw material available for production is limited to 200,000 pounds. If Cane uses its 200,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)
Required information [The following information applies to the questions displayed below.j Cane Company manufactures two products called Alpha and Beta that sell for $135 and $95, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 105,000 units of each product. Its average cost per unit for each product at this level of activity are given below Alpha Beta Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit 30 23 10 19 15 18 $115 $18 16 21 13 $87 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 dollarsExplanation / Answer
1. Traceable fixed manufacturing overhead:
Alpha=105,000 units × $19 per unit
=$1,995,000
Beta=105,000 units ×$21
=$2,205,000
2.
Alpha common fixed expenses=105,000 units×$18/unit=$1,890,000
Beta common fixed expenses = 100,000 units × $13/unit=$1,365,000
Total common fixed expenses=$3,255,000
3.
Relevant costs:
=Direct material+ labour+ variable overhead+ variable selling expenses
=$30+$23+$10+$15
=$78 per unit
Revenue(13000×$92)=$1,196,000
Less: product cost(13000×$78)=$1,014,000
Incremental revenue=$182,000
Profit will increase by $182,000 , if company accepts the offer.
4.
Beta Relevant costs:
=Direct material+ labour+ variable overhead+ variable selling expenses
=$18+$16+$8+$11
=$53 per unit
Revenue(4000×$42)=$168,000
Less: product cost(4000×$53)=$212,000
Loss=$(44,000)
There is net loss of $44,000 if company accepts the offer.
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