9. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. A supplier has offered to manufacture and deliver 88,000 Alphas to Cane for a price of $112 per unit. What is the financial advantage (disadvantage) of buying 88,000 units from the supplier instead of making those units?
9. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. A supplier has offered to manufacture and deliver 88,000 Alphas to Cane for a price of $112 per unit. What is the financial advantage (disadvantage) of buying 88,000 units from the supplier instead of making those units?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Total cost per unit
Alpha
$ 30
22
20
24
20
23
$ 139
Beta
$ 10
29
13:
26
16
18
$ 112
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.
9. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 88,000 Alphas to Cane for a price of $112 per unit. What is the financial advantage (disadvantage) of buying 88,000 units from
the supplier instead of making those units?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F56b4ab23-f6d5-4206-a94e-63cad8267fd4%2F1612e96e-ebcd-4db7-9f59-56f5b52331b1%2F0n52hrm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Total cost per unit
Alpha
$ 30
22
20
24
20
23
$ 139
Beta
$ 10
29
13:
26
16
18
$ 112
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.
9. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 88,000 Alphas to Cane for a price of $112 per unit. What is the financial advantage (disadvantage) of buying 88,000 units from
the supplier instead of making those units?
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