Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 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 Beta $ 35 $ 15 48 23 27 25 11 35 38 32 28 35 30 $ 212 $ 159 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. ssume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has d a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity decrease Alpha sales to regular customers by 14,000 units.
Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 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 Beta $ 35 $ 15 48 23 27 25 11 35 38 32 28 35 30 $ 212 $ 159 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. ssume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has d a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity decrease Alpha sales to regular customers by 14,000 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 $240 and $162, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000
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
Req 5A
35 48 27 35 32
Req 5B
$ 35
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.
Beta
2b Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has
found a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity
will decrease Alpha sales to regular customers by 14,000 units.
Financial (disadvantage)
Financial advantage
a. What is the financial advantage (disadvantage) of accepting the new customer's order?
b. Based on your calculations above should the special order be accepted?
Complete this question by entering your answers in the tabs below.
< Req 5A
$ 15
23
25
38
28
30
35
$ 212 $ 159
What is the financial advantage (disadvantage) of accepting the new customer's order?
Req 5B >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe9f99bc1-b177-45e1-a6f4-6be690697c34%2F218276d0-a571-46df-83ce-0506aabdb2e8%2Fwdehdux_processed.png&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 $240 and $162, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000
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
Req 5A
35 48 27 35 32
Req 5B
$ 35
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.
Beta
2b Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has
found a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity
will decrease Alpha sales to regular customers by 14,000 units.
Financial (disadvantage)
Financial advantage
a. What is the financial advantage (disadvantage) of accepting the new customer's order?
b. Based on your calculations above should the special order be accepted?
Complete this question by entering your answers in the tabs below.
< Req 5A
$ 15
23
25
38
28
30
35
$ 212 $ 159
What is the financial advantage (disadvantage) of accepting the new customer's order?
Req 5B >
![Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000
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
$ 35
48
27
35
32
35
$ 212
Beta
Financial (disadvantage)
Financial advantage
$15
23
25
38
28
30
$ 159
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.
2a Assume that Cane expects to produce and sell 110,000 Betas during the current year. One of Cane's sales representatives has
found a new customer who is willing to buy 2,000 additional Betas for a price of $83 per unit. What is the financial advantage
(disadvantage) of accepting the new customer's order?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe9f99bc1-b177-45e1-a6f4-6be690697c34%2F218276d0-a571-46df-83ce-0506aabdb2e8%2F1k452z_processed.png&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 $240 and $162, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000
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
$ 35
48
27
35
32
35
$ 212
Beta
Financial (disadvantage)
Financial advantage
$15
23
25
38
28
30
$ 159
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.
2a Assume that Cane expects to produce and sell 110,000 Betas during the current year. One of Cane's sales representatives has
found a new customer who is willing to buy 2,000 additional Betas for a price of $83 per unit. What is the financial advantage
(disadvantage) of accepting the new customer's order?
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