Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha $ 30 Beta Direct materials $ 12 Direct labor 20 15 Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses 17 16 18 12 15 10 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. 9. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. A supplier has offered to manufacture and deliver 80,000 Alphas to Cane for a price of $80 per unit. What is the financial advantage (disadvantage) of buying 80,000 units from the supplier instead of making those units?
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha $ 30 Beta Direct materials $ 12 Direct labor 20 15 Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses 17 16 18 12 15 10 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. 9. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. A supplier has offered to manufacture and deliver 80,000 Alphas to Cane for a price of $80 per unit. What is the financial advantage (disadvantage) of buying 80,000 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 $120 and $80, respectively. Each product
uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha
$ 30
Beta
Direct materials
$12
Direct labor
20
15
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
15
16
18
12
8
15
10
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.
9. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 80,000 Alphas to Cane for a price of $80 per unit. What is the financial advantage (disadvantage) of buying 80,000 units from
the supplier instead of making those units?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2Fa209b073-140b-4346-800e-130ba5f63ac6%2Fzs93l7_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 $120 and $80, respectively. Each product
uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha
$ 30
Beta
Direct materials
$12
Direct labor
20
15
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
15
16
18
12
8
15
10
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.
9. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 80,000 Alphas to Cane for a price of $80 per unit. What is the financial advantage (disadvantage) of buying 80,000 units from
the supplier instead of making those units?
![Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product
uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha
$ 30
Beta
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
$ 12
20
15
15
16
18
12
15
10
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.
10. Assume that Cane expects to produce and sell 50,000 Alphas during the current year A supplier has offered to manufacture and
deliver 50,000 Alphas to Cane for a price of $80 per unit. What is the financial advantage (disadvantage) of buying 50,000 units from
the supplier instead of making those units?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda625b26-af5c-4d40-b5ca-dba856450987%2Fa209b073-140b-4346-800e-130ba5f63ac6%2Fdh97m6_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 $120 and $80, respectively. Each product
uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha
$ 30
Beta
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
$ 12
20
15
15
16
18
12
15
10
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.
10. Assume that Cane expects to produce and sell 50,000 Alphas during the current year A supplier has offered to manufacture and
deliver 50,000 Alphas to Cane for a price of $80 per unit. What is the financial advantage (disadvantage) of buying 50,000 units from
the supplier instead of making those units?
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Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
| Alpha | Beta | |
|---|---|---|
| Direct materials | $ 25 | $ 10 |
| Direct labor | 22 | 21 |
| Variable manufacturing overhead | 17 | 7 |
| Traceable fixed manufacturing overhead | 18 | 20 |
| Variable selling expenses | 14 | 10 |
| Common fixed expenses | 17 | 12 |
| Total cost per unit | $ 113 | $ 80 |
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 82,000 Alphas during the current year. A supplier has offered to manufacture and deliver 82,000 Alphas to Cane for a price of $88 per unit. What is the financial advantage (disadvantage) of buying 82,000 units from the supplier instead of making those units?
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