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##### Cane Company_Alpha and Beta

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Question;Cane Company manufactures two products called Alpha;and Beta that sale for $120 and $80 respectively. Each product uses only one;type of raw material that costs $6 per pound. The company has the capacity to;annually produce 100,000 units of product. Its unit cost for each product at;this level of activity are given below;Alpha Beta;Direct Materials 30 12;Direct Labor 20 15;Variable Man. Overhead 7 5;Traceable Fixed 16 18;Variable Selling Exp 12 8;Common Fixed Exp 15 10;Total 100 68;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.;1. What;is the total amount of traceable fixed manufacturing overhead for the Alpha;product line and for the Beta product line?;2. What;is the company?s total amount of common fixed expenses? (Alpha & Beta);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 that is willing to;buy an additional 10,000 alphas for a price of $80 per unit. If Cane accepts;the offer how much will its profit increase or decrease?;4. Same;as #3 but produce and sell 90,000, customer willing to buy 5000 for a price of;39 per unit. (Profit In or Decre);5. Same;as #3 but produce and sale 95,000, customer is willing to buy 10,000 for a;price of 80 per unit. If Cane accepts the offer it will decrease Alphas sales;to regular customers by 5000 units. What is the amount of incremental net;operating income if the order is accepted?;6. Assume;that Cane normally produces and sells 90,000 Betas per year. If Cane;discontinues the Beta products line how much will profits increase or decrease?;7. Same;as #6 but produces and sales 40,000 Betas per year? (Inc or Decr);8. Assume;that Cane normally produces and sales 60,000 Betas and 80,000 Alphas per year. If;Cane discontinues the Beta product line, its Sales Reps could increase sales of;Alpha by 15,000 units. If Cane discontinues the Beta line how much will profits;increase or decrease?;9. Assume;that Cane expects to produce and sell 80,000 Alphas during the current year. A;supplier has offered to manufacture and deliver 80,000 Alphas to Cane for a;price of 80 per unit. If Cane buys 80,000 units from the supplier instead of;making them how much will profits increase or decrease?;10. Same;as #9 but produce and sell 50,000 Alphas, manufacture and deliver 50,000 for a;price of 80 per unit. If Cane buys the units instead of making them how much;will its profits increase or decrease?;11. How;many pounds of raw material are needed to make one unit of Alpha and one unit;of Beta?;12. What;contribution margin per pound of raw material is earned by Alpha and Beta?;13. Assume;that Cane?s customers would buy a maximum of 80,000 units of Alpha and 60,000;of Beta. Also assume that the company?s raw material available for production;is limited to 160,000 pounds. How many units of each product should Cane;produce to maximize profits?;14. Assume;that Cane?s customers would buy a maximum of 80,000 units of Alpha and 60,000;of Beta. Company?s raw material available for production is limited to 160,000;pounds. What is the maximum contribution margin Cane Company can earn given the;limited quantity of raw materials?;15. Same;as #14 but up to how much should it be willing to pay per pound for additional;raw materials.

Paper#37370 | Written in 18-Jul-2015

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