Reference no: EM132596551

Cane Company manufactures two products called Alpha and Beta that sell for $195 and $150, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 123,000 units of each product. Its unit costs for each product at this level of activity are given below:

                                                  Alpha             Beta

Direct materials                        $40              $15

Direct labour                               34               28

Variable manufacturing overhead     22                   20

Traceable fixed manufacturing overhead 30            33

Variable selling expenses                       27            23

Common fixed expenses                     30               25

Cost per unit                                   $183             $144

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.

Question 1. What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line?

Question 2. What is the company's total amount of common fixed expenses?

Question 3. Assume that Cane expects to produce and sell 95,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 25,000 additional Alphas for a price of $140 per unit. If Cane accepts the customer's offer, how much will its profits increase or decrease?

Question 4. Assume that Cane expects to produce and sell 105,000 Betas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 2,000 additional Betas for a price of $63 per unit. If Cane accepts the customer's offer, how much will its profits increase or decrease?

Question 5. Assume that Cane expects to produce and sell 110,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 25,000 additional Alphas for a price of $140 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 12,000 units.

a. Calculate the incremental net operating income if the order is accepted?

Question 6 Assume that Cane normally produces and sells 105,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

Question 7. Assume that Cane normally produces and sells 55,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

Question 8. Assume that Cane normally produces and sells 75,000 Betas and 95,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 15,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

Question 9. Assume that Cane expects to produce and sell 95,000 Alphas during the current year. A supplier has offered to manufacture and deliver 95,000 Alphas to Cane for a price of $140 per unit. If Cane buys 95,000 units from the supplier instead of making those units, how much will profits increase or decrease?

Question 10. Assume that Cane expects to produce and sell 70,000 Alphas during the current year. A supplier has offered to manufacture and deliver 70,000 Alphas to Cane for a price of $140 per unit. If Cane buys 70,000 units from the supplier instead of making those units, how much will profits increase or decrease?

Question 11. How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta?

Question 12. What contribution margin per pound of raw material is earned by Alpha and Beta

Question 13. Assume that Cane's customers would buy a maximum of 95,000 units of Alpha and 75,000 units of Beta. Also assume that the company's raw material available for production is limited to 245,000 pounds. How many units of each product should Cane produce to maximize its profits?

Question 14. Assume that Cane's customers would buy a maximum of 95,000 units of Alpha and 75,000 units of Beta. Also assume that the company's raw material available for production is limited to 245,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

Question 15. Assume that Cane's customers would buy a maximum of 95,000 units of Alpha and 75,000 units of Beta. Also assume that the company's raw material available for production is limited to 245,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials?