Reference no: EM132954684
Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product.
Its average cost per unit for each product at this level of activity are given below:
Alpha Beta
Direct materials $40 $24
Direct labor 38 34
Variable manufacturing overhead 25 23
Traceable fixed manufacturing overhead 33 36
Variable selling expenses 30 26
Common fixed expenses 33 28
Total cost per unit $199 $171
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.
Problem 1. What is the total amount of traceable fixed manufacturing overhead for each of the two products?
Problem 2. What is the company's total amount of common fixed expenses?
Problem 3. Assume that Cane expects to produce and sell 98,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 28,000 additional Alphas for a price of $152 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?
Problem 4. Assume that Cane expects to produce and sell 108,000 Betas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 3,000 additional Betas for a price of $81 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?