Question

Cane Company manufactures two products called alpha and beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

Alpha/Beta

Direct materials $32/16

Direct Labor $24/19

Variable Manufacturing Overhead $10/9

Traceable fixed manufacturing overhead $20/22

Variable selling expenses $16/12

common fixed expenses $19/14

total cost per unit $121/92

1. What is the total amount of traceable fixed manufacturing overhead for each of the two products?

2. What is the company's total amount of common fixed expenses?

3. Assume that cane expects to produce and sell 84,000 Alphas during the current year. One of canes sales representatives has found a new customer who is willing to buy 14,000 additional Alphas for a price of $96 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

4. Assume that cane expects to produce and sell 94,000 Betas during the current year. One of canes sales representatives has found a new customer who is willing to buy 5,000 additional Alphas for a price of $43 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

5. Assume that cane expects to produce and sell 99,000 Alphas during the current year. One of canes sales representatives has found a new customer who is willing to buy 14,000 additional Alphas for a price of $96 per unit. however pursuing this opportunity will decrease Alpha sales to regular customers by 7,00 units. What is the financial advantage (disadvantage) of accepting the new customers order?

6. Assume that Cane normally produces and sells 94,000 betas per year. What is the financial advantage (disadvantage) of discontinuing the beta product line?

7. Assume that cane expects to produce and sells 44,000 betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

8. Assume that cane normally produces and sells 64,000 betas and 84,000 alphas per year. If cane discontinues the Beta product line, its sales representatives could increase  sales of Alpha by 19,000 units. What is the financial advantage (disadvantage) of discontinuing the beta product line?

9. Assume that cane expects to produce and sell 84,000 alphas during the current year. A supplier has offered to manufacture and deliver 84,000 Alphas to cane for a price of $96 per unit. What is the financial advantage (disadvantage) of buying 84,000 units from the supplier instead of making those units?

10. Assume that cane expects to produce and sell 54,000 alphas during the current year. A supplier has offered to manufacture and deliver 54,000 alphas to cane for a price of $96 per unit. What is the financial advantage (disadvantage) of buying 54,000 units from the supplier instead of making those units?

11. How many pounds of raw material are needed to make one unit of each of the wo product?

12. Assume that canes customer would buy a maximum of 84,000 units of alpha and 64,000 units of beta. Also assume that the companys raw material available for production is limited to 166,000 pounds. How many units of each product should cane produce to maximize its profits?

14. Assume that canes customers would buy a maximum of 84,000 units of alpha and 64,000 units of beta. Also assume that the companys raw material available for production is limited to 166,000 pounds. What is the maximum contribution margin cane company can earn given the limited quantity of raw materials?

15. Assume that canes customers would buy a maximum of 84,000 units of alpha and 64,000 units of beta. Also assume that the companys raw material available for production is limited to 166,000 pounds. if cane uses its 166,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials? (round to nearest 2 decimal places)

Answer 1

Solved first four sub parts as per HOMEWORKLIB POLICY. Please post remaining separately

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Part 1
			Alpha	Beta
Traceable Fixed Manufacturing overhead per unit	a		$             20	$             22
No of Units	b		106,000	106,000
Total Traceable Fixed Manufacturing overheads	a*b		$2,120,000	$2,332,000
Part 2
			Alpha	Beta
Common Fixed Expense per unit	a		$             19	$             14
No of Units	b		106,000	106,000
Total Common Fixed Expense	a*b		$2,014,000	$1,484,000
Part 3
Selling price per unit			$             96
Less: Relevant Cost
Direct Material		$         32
Direct Labor		$         24
Variable Manufacturinv overheads		$         10
Variable selling expense		$         16
Total Relevant Cost			$            -82
Financial Advantage per unit			$             14
Total Financial Advantage (14,000*$14)			$   196,000
Part 4
Selling price per unit			$             43
Less: Relevant Cost
Direct Material		$         16
Direct Labor		$         19
Variable Manufacturinv overheads		$           9
Variable selling expense		$         12
Total Relevant Cost			$            -56
Financial Disdvantage per unit			$            -13
Total Financial Disadvantage (5,000*$13)			$    -65,000