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 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 Profit Alpha $ 35 48 27 35 32 35 $212 Beta $ 15 23 25 38 28 30 $159 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. Assume that Cane expects to produce and sell 100,000 Alphas during the current year. A supplier has offered to manufacture and eliver 100,000 Alphas to Cane for a price of $160 per unit. If Cane buys 100,000 units from the supplier instead of making those units, how much will profits increase or decrease?
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 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 Profit Alpha $ 35 48 27 35 32 35 $212 Beta $ 15 23 25 38 28 30 $159 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. Assume that Cane expects to produce and sell 100,000 Alphas during the current year. A supplier has offered to manufacture and eliver 100,000 Alphas to Cane for a price of $160 per unit. If Cane buys 100,000 units from the supplier instead of making those units, how much will profits increase or decrease?
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 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
Profit
Alpha
$ 35
48
27
35
32
35
$212
by
Beta
$ 15
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.
23
25
38
28
30
$159
9. Assume that Cane expects to produce and sell 100,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 100,000 Alphas to Cane for a price of $160 per unit. If Cane buys 100,000 units from the supplier instead of making those units,
how much will profits increase or decrease?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4d1a0e01-fba6-4838-a81f-fcca6422d88d%2F526dcf8e-fd68-47b5-a05a-3d158f5495cc%2Fkn29clk_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 $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 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
Profit
Alpha
$ 35
48
27
35
32
35
$212
by
Beta
$ 15
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.
23
25
38
28
30
$159
9. Assume that Cane expects to produce and sell 100,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 100,000 Alphas to Cane for a price of $160 per unit. If Cane buys 100,000 units from the supplier instead of making those units,
how much will profits increase or decrease?
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