[The following informationapplies to the questions displayed below.]Cane Company manufactures two products called Alpha...[The...

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[The following informationapplies to the questions displayed below.]

Cane Company manufactures two products called Alpha and Betathat sell for $185 and $150, respectively. Each product uses onlyone type of raw material that costs $8 per pound. The company hasthe capacity to annually produce 119,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:

AlphaBeta
  Direct materials$40$24
  Direct labor3328
  Variablemanufacturing overhead2018
  Traceable fixedmanufacturing overhead2831
  Variable sellingexpenses2521
  Common fixedexpenses2823
  Total cost perunit$174$145

The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.

1.

What is the total amount of traceable fixed manufacturingoverhead for the Alpha product line and for the Beta product line?Traceable fixed manufacturing overhead? Alpha - Beta

2.What is the company’s total amount of common fixed expenses? Totalcommon fixed expenses?
3.

Assume that Cane expects to produce and sell 93,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer that is willing to buy 23,000 additionalAlphas for a price of $132 per unit. If Cane accepts the customer’soffer, how much will its profits increase or decrease? Netoperating income by?

4.

Assume that Cane expects to produce and sell 103,000 Betasduring the current year. One of Cane’s sales representatives hasfound a new customer that is willing to buy 2,000 additional Betasfor a price of $61 per unit. If Cane accepts the customer’s offer,how much will its profits increase or decrease? Net operatingincome by?

       

Answer & Explanation Solved by verified expert
4.3 Ratings (615 Votes)

1
Alpha Beta
A Traceable Fixed MOH PU 28.00 31.00
B Units to produced 119000 119000
A*B Traceable Fixed MOH Total 3332000 3689000 7021000
2
Alpha Beta
A Common Cost PU 28.00 23.00
B Units to produced 119000 119000
A*B Common Cost Total 3332000 2737000 6069000
3&4 Alpha Beta
Current Sales Demand 93000 103000
Add: External Special Order 23000 2000
Total 116000 105000
(Within Capacity)
Relevant Cost for Special Order: Alpha Beta
Direct Material 40.00 24.00
Direct Labor 33.00 28.00
VMOH 20.00 18.00
Traceable Fixed MOH PU 28.00 31.00
Variable Sales Exp 25.00 21.00
Total Relevant Cost 146.00 122.00
Special Selling Price 132.00 61.00
Loss in Selling -14.00 -61.00
Special Order Units 23000 2000
Financial Disadvantage -322000 -122000

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In: Accounting[The following informationapplies to the questions displayed below.]Cane Company manufactures two products called Alpha...[The following informationapplies to the questions displayed below.]Cane Company manufactures two products called Alpha and Betathat sell for $185 and $150, respectively. Each product uses onlyone type of raw material that costs $8 per pound. The company hasthe capacity to annually produce 119,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:AlphaBeta  Direct materials$40$24  Direct labor3328  Variablemanufacturing overhead2018  Traceable fixedmanufacturing overhead2831  Variable sellingexpenses2521  Common fixedexpenses2823  Total cost perunit$174$145The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.1.What is the total amount of traceable fixed manufacturingoverhead for the Alpha product line and for the Beta product line?Traceable fixed manufacturing overhead? Alpha - Beta2.What is the company’s total amount of common fixed expenses? Totalcommon fixed expenses?3.Assume that Cane expects to produce and sell 93,000 Alphasduring the current year. One of Cane's sales representatives hasfound a new customer that is willing to buy 23,000 additionalAlphas for a price of $132 per unit. If Cane accepts the customer’soffer, how much will its profits increase or decrease? Netoperating income by?4.Assume that Cane expects to produce and sell 103,000 Betasduring the current year. One of Cane’s sales representatives hasfound a new customer that is willing to buy 2,000 additional Betasfor a price of $61 per unit. If Cane accepts the customer’s offer,how much will its profits increase or decrease? Net operatingincome by?       

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