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(Solution Download) [The following information applies to the questions displayed below.] Cane Company manufactures two


 

 

 

 

 

 

[The following information

 

applies to the questions displayed below.]

 

 

 

 

 

 

 

 

Cane Company manufactures two products called Alpha and Beta

 

that sell for $195 and $150, respectively. Each product uses only

 

one type of raw material that costs $5 per pound. The company has

 

the capacity to annually produce 123,000 units of each product. Its

 

unit costs for each product at this level of activity are given

 

below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alpha

 

Beta

  Direct

 

materials

$40$15
  Direct labor3428
  Variable

 

manufacturing overhead

2220
  Traceable fixed

 

manufacturing overhead

3033
  Variable selling

 

expenses

2723
  Common fixed

 

expenses

3025
  Total cost per

 

unit

$183$144

 

 

 

 

 

 

 

 

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.

 

 

A.What is the total amount of traceable fixed manufacturing

 

overhead for the Alpha product line and for the Beta product

 

line?

 

Traceable fixed manufacturing overhead Alpha ? Beta?

 

B.What is the companyA????1s total amount of common fixed

 

expenses?

 

C.Assume that Cane expects to produce and sell 95,000 Alphas

 

during the current year. One of Cane's sales representatives has

 

found a new customer that is willing to buy 25,000 additional

 

Alphas for a price of $140 per unit. If Cane accepts the customerA????1s

 

offer, how much will its profits increase or decrease?

 

Net operating income ? by?

 

D.Assume that Cane expects to produce and sell 105,000 Betas

 

during the current year. One of CaneA????1s sales representatives has

 

found a new customer that is willing to buy 2,000 additional Betas

 

for a price of $63 per unit. If Cane accepts the customerA????1s offer,

 

how much will its profits increase or decrease?

 

Net operating income ? by?

 

F. Assume that Cane normally

 

produces and sells 105,000 Betas per year. If Cane discontinues the

 

Beta product line, how much will profits increase or

 

decrease?E.Assume that Cane expects to produce and sell

 

110,000 Alphas during the current year. One of Cane's sales

 

representatives has found a new customer that is willing to buy

 

25,000 additional Alphas for a price of $140 per unit. If Cane

 

accepts the customerA????1s offer, it will decrease Alpha sales to

 

regular customers by 12,000 units.

 

-Calculate the incremental net operating income if the order is

 

accepted?

 

Profit ? By?

 

H. Assume that Cane normally

 

produces and sells 75,000 Betas and 95,000 Alphas per year. If Cane

 

discontinues the Beta product line, its sales representatives could

 

increase sales of Alpha by 15,000 units. If Cane discontinues the

 

Beta product line, how much would profits increase or

 

decrease?G. Assume that Cane normally produces and sells

 

55,000 Betas per year. If Cane discontinues the Beta product line,

 

how much will profits increase or decrease?

 

Profit ? By?

 

J.Assume that Cane expects to

 

produce and sell 70,000 Alphas during the current year. A supplier

 

has offered to manufacture and deliver 70,000 Alphas to Cane for a

 

price of $140 per unit. If Cane buys 70,000 units from the supplier

 

instead of making those units, how much will profits increase or

 

decrease?I.Assume that Cane expects to produce and sell

 

95,000 Alphas during the current year. A supplier has offered to

 

manufacture and deliver 95,000 Alphas to Cane for a price of $140

 

per unit. If Cane buys 95,000 units from the supplier instead of

 

making those units, how much will profits increase or

 

decrease?

 

Profit ? By?

 

 

 

 

 

 

 

 

K. How many pounds of raw material are needed to

 

make one unit of Alpha and one unit of Beta?

 

Pounds of raw material Alpha ? Beta?

 

L.What contribution margin per pound of raw material is earned

 

by Alpha and Beta? (Round your answers to 2 decimal

 

places.)

 

Contribution margin per pound alpha? Beta?

 

 

 

 

 

 

 

 

 

L. Assume that CaneA????1s customers would buy a maximum of 95,000

 

units of Alpha and 75,000 units of Beta. Also assume that the

 

companyA????1s raw material available for production is limited to

 

245,000 pounds. How many units of each product should Cane produce

 

to maximize its profits?

 

Units Produced Alpha? Beta?

 

 

 

 

 

 

 

 

 

 

 

 

M. Assume that CaneA????1s customers would buy a maximum of 95,000

 

units of Alpha and 75,000 units of Beta. Also assume that the

 

companyA????1s raw material available for production is limited to

 

245,000 pounds. What is the maximum contribution margin Cane

 

Company can earn given the limited quantity of raw materials?

 

Total contribution margin?

 

 

N.Assume that CaneA????1s customers would buy a maximum of 95,000

 

units of Alpha and 75,000 units of Beta. Also assume that the

 

companyA????1s raw material available for production is limited to

 

245,000 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?

 

 


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