Required information The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6] [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct labor Direct materials Variable manufacturing overhead Common fixed expenses Traceable fixed manufacturing overhead Variable selling expenses Total cost per unit Alpha $ 25 Beta $ 10 22 21 17 7 18 20 14 10 17 12 $ 113 $ 80 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. Foundational 11-9 (Algo) 9. Assume that Cane expects to produce and sell 82,000 Alphas during the current year. A supplier has offered to manufacture and deliver 82,000 Alphas to Cane for a price of $88 per unit. What is the financial advantage (disadvantage) of buying 82,000 units from the supplier instead of making those units? Answer is complete but not entirely correct. Financial (disadvantage) 492,000

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Required information
The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6]
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Direct labor
Direct materials
Variable manufacturing overhead
Common fixed expenses
Traceable fixed manufacturing overhead
Variable selling expenses
Total cost per unit
Alpha
$ 25
Beta
$ 10
22
21
17
7
18
20
14
10
17
12
$ 113 $ 80
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.
Foundational 11-9 (Algo)
9. Assume that Cane expects to produce and sell 82,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 82,000 Alphas to Cane for a price of $88 per unit. What is the financial advantage (disadvantage) of buying 82,000 units from
the supplier instead of making those units?
Answer is complete but not entirely correct.
Financial (disadvantage)
492,000
Transcribed Image Text:Required information The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6] [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct labor Direct materials Variable manufacturing overhead Common fixed expenses Traceable fixed manufacturing overhead Variable selling expenses Total cost per unit Alpha $ 25 Beta $ 10 22 21 17 7 18 20 14 10 17 12 $ 113 $ 80 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. Foundational 11-9 (Algo) 9. Assume that Cane expects to produce and sell 82,000 Alphas during the current year. A supplier has offered to manufacture and deliver 82,000 Alphas to Cane for a price of $88 per unit. What is the financial advantage (disadvantage) of buying 82,000 units from the supplier instead of making those units? Answer is complete but not entirely correct. Financial (disadvantage) 492,000
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