Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials. Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $30 22 20 24 20 23 $139 Incremental net operating income Betal $10 29 13 26 16 18 $112 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. 5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 18,000 additional Alphas for a price of $112 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 9,000 units. a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials. Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $30 22 20 24 20 23 $139 Incremental net operating income Betal $10 29 13 26 16 18 $112 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. 5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 18,000 additional Alphas for a price of $112 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 9,000 units. a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
Chapter5: Process Costing
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Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
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Transcribed Image Text:Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000
units of each product. Its unit costs for each product at this level of activity are given below:
Direct materials
Direct labour
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Cost per unit
Alpha
$30
22
20
24
20
23
$139
Incremental net operating income
Beta
$10
29
13
26
16
18
$112
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.
5. Assume that Cane expects to produce and sell 103,000 Alphas during the current year. One of Cane's sales representatives has
found a new customer that is willing to buy 18,000 additional Alpl for a price of $112 per init. If Cane accepts the customer's offer, it
will decrease Alpha sales to regular customers by 9,000 units.
a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)
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