[The following information applies to the questions displayed below.j 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 is 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's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
[The following information applies to the questions displayed below.j 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 is 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's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.
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 is 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
$15
23
25
38
28
30
$ 159
The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are
unavoidable and have been allocated to products based on sales dollars.
5. Assume Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives found a new
customer 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.
Required 5A Required 5B
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.
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%2F66ba8078-8c12-4abf-bf2c-00332d3ac0d8%2F4c45610a-269a-47ab-8281-e5594bf0e3a6%2F7x5m9gp_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 is 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
$15
23
25
38
28
30
$ 159
The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are
unavoidable and have been allocated to products based on sales dollars.
5. Assume Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives found a new
customer 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.
Required 5A Required 5B
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.
What is the financial advantage (disadvantage) of accepting the new customer's order?
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