Optional Extra Credit KoQuestions 2-16 (of 26) The following information applies

Question

Optional Extra Credit KoQuestions 2-16 (of 26) The following information applies to the questions dispiayed below Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128.000 units of each product. Its unit costs for each product at this level of activity are given below Direct materials Direct labor Vanable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses AlphaBeta $ 40 $24 34 25 23 33 36 30 26 33 28 38 Total cost per unit $199 $171 The company considers its traceable fixed manufacturing overhead to be avoicdable whereas ts common ftxed expenses are deemed unavoidable and have been allocated to products based on sales doliors

Explanation / Answer

Cane Company Requirement 9 Cost of manufacturing Alpha at 98000 unit level Cost per unit Direct Materials 40 Direct labor 38 Variable Manufacturing Overhead 25 Traceble fixed manufacturing overhead 43.10204 =128000*33/98000 Total cost of manufacturing Alpha 146.102 Selling Price 210 Margin before variable selling expenses & common Fixed cost 63.89796 Less : Variable selling expenses 30 Margin before common fixed cost 33.89796 Expected quanity 98000 Total margin before common fixed cost 3322000 Less : Common Fixed costs Common for both option , so not considered Operating profit 3322000 Cost of buying from supplier 152 Selling Price 210 Margin before variable selling expenses & common Fixed cost 58 Less : Variable selling expenses 30 Margin before common fixed cost 28 Expected quanity 98000 Total margin before common fixed cost 2744000 Less : Common Fixed costs Common for both option , so not considered Operating profit 2744000 Thus Profit will decrease by 578000 Requirement 10 Cost of manufacturing Alpha at 73000 unit level Cost per unit Direct Materials 40 Direct labor 38 Variable Manufacturing Overhead 25 Traceble fixed manufacturing overhead 57.86301 =128000*33/73000 Requirement 11 Total cost of manufacturing Alpha 160.863 Selling Price 210 Margin before variable selling expenses & common Fixed cost 49.13699 Less : Variable selling expenses 30 Margin before common fixed cost 19.13699 Expected quanity 73000 Total margin before common fixed cost 1397000 Less : Common Fixed costs Common for both option , so not considered Operating profit 1397000 Cost of buying from supplier 152 Selling Price 210 Margin before variable selling expenses & common Fixed cost 58 Less : Variable selling expenses 30 Margin before common fixed cost 28 Expected quanity 73000 Total margin before common fixed cost 2044000 Less : Common Fixed costs Common for both option , so not considered Operating profit 2044000 Thus Profit will increase by 647000 Requirement 11 The following pounds of raw materials needed to make one unit of Alpha and one unit of Beta Alpha Beta Direct Materials in $ 40 24 Cost of each pound of direct material in $ 8 8 Pounds of raw materials needed per unit 5 3

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