Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 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 $ 40 37 24 32 Net operating income 29 32 $194 by Beta $24 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. 30 22 35 25 27 $163 3. Assume that Cane expects to produce and sell 97,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customer's of how much will its profits increase or decrease?
Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 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 $ 40 37 24 32 Net operating income 29 32 $194 by Beta $24 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. 30 22 35 25 27 $163 3. Assume that Cane expects to produce and sell 97,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customer's of how much will its profits increase or decrease?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 $205 and $164, respectively. Each product
uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000
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
$ 40
Net operating income
37
24
32
29
32
$194
by
Beta
$24
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.
30
22
35
25
27
$163
3. Assume that Cane expects to produce and sell 97,000 Alphas during the current year. One of Cane's sales representatives has
found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customer's offer,
how much will its profits increase or decrease?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0c2bba73-164f-4819-9a38-ab5c8a663884%2F271b3edf-76cc-41f7-86c1-8c0795def1b0%2F4ls1nkv_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 $205 and $164, respectively. Each product
uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000
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
$ 40
Net operating income
37
24
32
29
32
$194
by
Beta
$24
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.
30
22
35
25
27
$163
3. Assume that Cane expects to produce and sell 97,000 Alphas during the current year. One of Cane's sales representatives has
found a new customer that is willing to buy 27,000 additional Alphas for a price of $148 per unit. If Cane accepts the customer's offer,
how much will its profits increase or decrease?
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