Question

Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not i Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each prod. uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,0 units of each product. Its average cost per unit for each product at this level of activity are given below. Alpha $ 30 $12 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit $100 $68 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 dollars. Foundational 11-3 3. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. One of Cane's sales representatives ha found a new customer who is willing to buy 10,000 additional Alphas for a price of $80 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order? Answer is complete but not entirely correct.

Answer 1

Analysis of special order

Sales (10,000 x 80)	800,000
Expenses :
Direct material (10,000 x 30)	-300,000
Direct labor (10,000 x 20)	-200,000
Variable manufacturing overhead (10,000 x 7)	-70,000
Variable selling expenses (10,000 x 12)	-120,000
Net income	$110,000

Financial advantage of accepting new customer's order = $110,000

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