Question

Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below Alpha 40 29 Beta Direct materials $ 24 25 Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses 15 14 25 27 21 17 24 19 $154 $126 Total cost per unit 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.

Answer 1

Answer 6

Financial disadvantage

$   1,899,000

Explanation

	Amount	Calculation
Units produced	99,000.00
Loss of Sales	$ 12,870,000	99000*130
Savings in Cost	$   7,920,000	99000*80
Savings in Fixed cost	$   3,051,000
Financial disadvantage	$   1,899,000

Answer 7

Financial advantage

$ 601,000

Explanation

	Amount	Calculation
Units produced	49,000.00
Loss of Sales	$   6,370,000	49000*130
Savings in Cost	$   3,920,000	49000*80
Savings in Fixed cost	$   3,051,000
Financial disadvantage	$    (601,000)

Answer 9

Financial advantage

$   1,846,000

Explanation

	Amount	Calculation
Units produced	89,000.00
Purchase cost	$ 10,324,000	116*89000
Manufacturing cost	$   9,345,000	105*89000
Fixed Cost	$   2,825,000
Financial advantage	$   1,846,000

Answer 10

Financial advantage

$   2,176,000

Explanation

	Amount	Calculation
Units produced	59,000.00
Purchase cost	$   6,844,000	116*59000
Manufacturing cost	$   6,195,000	105*59000
Fixed Cost	$   2,825,000
Financial advantage	$   2,176,000

Answer 11

	Alpha	Beta
Pounds of raw material per unit	5	3

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