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 unit costs for each product at this level of activity are given below: Direct materials. Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $30 22 20 24 20 23 $139 Incremental net operating income Betal $10 29 13 26 16 18 $112 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. 5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 18,000 additional Alphas for a price of $112 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 9,000 units. a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
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 unit costs for each product at this level of activity are given below: Direct materials. Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $30 22 20 24 20 23 $139 Incremental net operating income Betal $10 29 13 26 16 18 $112 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. 5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 18,000 additional Alphas for a price of $112 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 9,000 units. a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please do not give solution in image format thanku
Transcribed Image Text: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 unit costs for each product at this level of activity are given below:
Direct materials
Direct labour
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Cost per unit
Alpha
$30
22
20
24
20
23
$139
Incremental net operating income
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 deemed unavoidable and have been allocated to products based on sales dollars.
5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has
found a new customer that is willing to buy 18,000 additional Alpl for a price of $112 per init. If Cane accepts the customer's offer, it
will decrease Alpha sales to regular customers by 9,000 units.
a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education