! Required information [The following information applies to the questions displayed below] 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 Betal $ 30 $ 10 22 29 20 13 24 26 20 16 23 18 $139 $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. 9. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. A supplier has offered to manufacture and deliver 88,000 Alphas to Cane for a price of $112 per unit. If Cane buys 88,000 units from the supplier instead of making those units, how much will profits increase or decrease? by Profit

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter5: Process Costing
Section: Chapter Questions
Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
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Required information
[The following information applies to the questions displayed below]
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
Betal
$ 30
$ 10
22
29
20
13
24
26
20
16
23
18
$139
$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.
9. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. A supplier has offered to manufacture and
deliver 88,000 Alphas to Cane for a price of $112 per unit. If Cane buys 88,000 units from the supplier instead of making those units,
how much will profits increase or decrease?
by
Profit
Transcribed Image Text:! Required information [The following information applies to the questions displayed below] 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 Betal $ 30 $ 10 22 29 20 13 24 26 20 16 23 18 $139 $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. 9. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. A supplier has offered to manufacture and deliver 88,000 Alphas to Cane for a price of $112 per unit. If Cane buys 88,000 units from the supplier instead of making those units, how much will profits increase or decrease? by Profit
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