Cane Company manufactures two products called Alpha and Betathat sell for $120 and $80, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 100,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
| Alpha | Beta |
| Direct materials | | $ | 30 | | | $ | 12 | |
| Direct labour | | | 20 | | | | 15 | |
| Variable manufacturing overhead | | | 7 | | | | 5 | |
| Traceable fixed manufacturing overhead | | | 16 | | | | 18 | |
| Variable selling expenses | | | 12 | | | | 8 | |
| Common fixed expenses | | | 15 | | | | 10 | |
| | | | | | | | |
| Cost per unit | | $ | 100 | | | $ | 68 | |
| | | | | | | | |
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The company considers its traceable fixed manufacturing overhead tobe avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.
Required:
1. What is the total amount of traceable fixed manufacturingoverhead for the Alpha product line and for the Beta productline?
2. What is the company’s total amount of common fixedexpenses?
3. Assume that Cane expects to produce and sell 80,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer that is willing to buy 10,000 additionalAlphas for a price of $80 per unit. If Cane accepts the customer’soffer, how much will its profits increase or decrease?
4. Assume that Cane expects to produce and sell 90,000 Betasduring the current year. One of Cane’s sales representatives hasfound a new customer that is willing to buy 5,000 additional Betasfor a price of $39 per unit. If Cane accepts the customer’s offer,how much will its profits increase or decrease?
5.
Assume that Cane expects to produce and sell 95,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer that is willing to buy 10,000 additionalAlphas for a price of $80 per unit. If Cane accepts the customer’soffer, it will decrease Alpha sales to regular customers by 5,000units.
a. Calculate the incremental net operating income if the order isaccepted? (Loss amount should be indicated with a minussign.)
answer all the question
