Use the information below to answer questions 1-5. UNIT COSTS(based on production of 100,000 units of...

Use the information below to answer questions 1-5.

UNIT COSTS(based on production of 100,000 units of each product).	ALPHA	BETA
DIRECT MATERIAL	$24	$18
DIRECT LABOR	20	16
VARIABLE OVERHEAD	10	6
VARIABLE SALES	10	6
TRACEABLE FIXED	12	10
COMMON FIXED COST	14	12

ADDITIONAL INFORMATION
SELLING PRICE PER UNIT	$120	$80
MATERIAL COST PER POUND	6	6
The company considers its traceable fixed cost to be avoidable.
whereas its common fixed expenses are unavoidable.

Required: (Answer each question)
1. What is the total amount of traceable fixed manufacturing overhead for each of the two products?

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

3. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 10,000 additional Alphas for a price of $80 per unit. What is the financial advantage (disadvantage) of accepting the new customer’s order?

4. Assume that Cane expects to produce and sell 90,000 Betas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 5,000 additional Betas for a price of $39 per unit. What is the financial advantage (disadvantage) of accepting the new customer’s order?

5. 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 who is willing to buy 10,000 additional Alphas for a price of $80 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 5,000 units. What is the financial advantage (disadvantage) of accepting the new customer’s order?

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Expert Solution

ekkarill92 answered 7 months ago

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