Question

Required information (The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 108,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 30 26 13 22 18 21 $130 Beta $ 15 22 11 24 14 16 $102 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

fx A B C D E 1 2 3 Number of units 16,000 3 Per Unit Total 4 5 30 26 13 6 7 Direct Material Direct Labor Variable Manufacturing Overhead Variable Selling Expenses Total Variable Cost Additional Sales Revenue Financial Advantage 18 480,000 416,000 208,000 288,000 1,392,000 1,664,000 272,000 8 87 9 104 17 10 11 12 13 5.a Number of units 16,000 14 Per Unit Total 15 30 26 16 17 13 480,000 416,000 208,000 288,000 1,392,000 18 18 87 19 Direct Material Direct Labor Variable Manufacturing Overhead Variable Selling Expenses Total Variable Cost Add : Contribution lost of 9000 units ($ 150 - $ 87) Total Relevant Cost Additional Sales Revenue Financial ( Disdvantage ) 20 63 21 567,000 1,959,000 1,664,000 (295,000) 22 104 23 24 25 26 7 Discontinue 27 28 29 30 Continue Sales 5,060,000 Less : Direct Material 690,000 Direct Labor 1,012,000 Variable Manufacturing Overhead 506,000 Variable Selling Expenses 644,000 Traceable Fixed Manufacturing Overhea 2,592,000 Common Fixed Expenses 1,728,000 Income /(Loss) (2,112,000) 31 32 33 34 1,728,000 (1,728,000) 35 36 37 Financial Advantage 384,000 38 39 40 Discontinue 41 0 42 43 0 44 Continue Sales =46000* 110 Less : Direct Material =46000* 15 Direct Labor =46000*22 Variable Manufacturing Overhead =46000*11 Variable Selling Expenses =46000*14 Traceable Fixed Manufacturing Overhea =108000*24 Common Fixed Expenses = 108000*16 0 45 0 46 0 47 0 = 108000* 16 48 49 50 51 Total 52 30 53 26 9 Relevant Cost to make Per Unit Direct Material Direct Labor Variable Manufacturing Overhead Traceable Fixed Manufacturing Overhea Total 54 13 22 2,580,000 2,236,000 1,118,000 2,376,000 8,310,000 55 56 57 58 Per Unit Cost to Buy Purchase Price Total 8,944,000 59 104 60 61 Financial ( Disadvantage ) (634,000) 62 63