Question

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:

	Alpha				Beta
Direct materials		$	40			$	24
Direct labor			38				34
Variable manufacturing overhead			25				23
Traceable fixed manufacturing overhead			33				36
Variable selling expenses			30				26
Common fixed expenses			33				28
Total cost per unit		$	199			$	171

The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.

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 overhead

2.

What is the company’s total amount of common fixed expenses?

Total common fixed expenses

3.

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 that is willing to buy 28,000 additional Alphas for a price of $152 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?

Net operating income

by

Assume that Cane expects to produce and sell 108,000 Betas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 3,000 additional Betas for a price of $81 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?

Net operating income

by

5.

Assume that Cane expects to produce and sell 113,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 28,000 additional Alphas for a price of $152 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 13,000 units.

a.

Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)

Incremental net operating income

b.

Based on your calculations above should the special order be accepted?

	Yes
	No

6.

Assume that Cane normally produces and sells 108,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

Profit

by

7.

Assume that Cane normally produces and sells 58,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

Profit

by

Assume that Cane normally produces and sells 78,000 Betas and 98,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

Profit

by

9.

Assume that Cane expects to produce and sell 98,000 Alphas during the current year. A supplier has offered to manufacture and deliver 98,000 Alphas to Cane for a price of $152 per unit. If Cane buys 98,000 units from the supplier instead of making those units, how much will profits increase or decrease?

Profit

by

10.

Assume that Cane expects to produce and sell 73,000 Alphas during the current year. A supplier has offered to manufacture and deliver 73,000 Alphas to Cane for a price of $152 per unit. If Cane buys 73,000 units from the supplier instead of making those units, how much will profits increase or decrease?

Profit

by

11.

How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta?

	Alpha	Beta
Pounds of raw materials per unit

12.	What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.)

	Alpha	Beta
Contribution margin per pound

13.

Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 pounds. How many units of each product should Cane produce to maximize its profits?

Units Produced

Alpha	Beta

14.

Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

	Total contribution margin

15.

Assume that Cane’s customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the company’s raw material available for production is limited to 248,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)

Maximum price to be paid per pound

PLEASE PROVIDE THE STEPS ON HOW YOU FIND THE ANSWER!!! THANKS IN ADVANCE

Answer 1