Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity is given below:

	Alpha	Beta
Direct materials	$ 40	$ 24
Direct labor	29	25
Variable manufacturing overhead	15	14
Traceable fixed manufacturing overhead	25	27
Variable selling expenses	21	17
Common fixed expenses	24	19
Total cost per unit	$ 154	$ 126

The companys traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.

1. What is the total traceable fixed manufacturing overhead for each of the two products?

2. What is the companys total common fixed expenses?

3. Assume Cane expects to produce and sell 89,000 Alphas during the current year. One of Cane's sales representatives found a new customer willing to buy 19,000 additional Alphas for a price of $116 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

4. Assume Cane expects to produce and sell 99,000 Betas during the current year. One of Canes sales representatives found a new customer willing to buy 2,000 additional Betas for a price of $48 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

5. Assume Cane expects to produce and sell 104,000 Alphas during the current year. One of Cane's sales representatives found a new customer willing to buy 19,000 additional Alphas for a price of $116 per unit; however, pursuing this opportunity will decrease Alpha sales to regular customers by 10,000 units.

1. What is the financial advantage (disadvantage) of accepting the new customers order?
2. Based on your calculations above should the special order be accepted?

6. Assume Cane normally produces and sells 99,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

7. Assume Cane normally produces and sells 49,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

8. Assume Cane normally produces and sells 69,000 Betas and 89,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 13,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

9. Assume Cane expects to produce and sell 89,000 Alphas during the current year. A supplier offered to manufacture and deliver 89,000 Alphas to Cane for a price of $116 per unit. What is the financial advantage (disadvantage) of buying 89,000 units from the supplier instead of making those units?

10. Assume Cane expects to produce and sell 59,000 Alphas during the current year. A supplier offered to manufacture and deliver 59,000 Alphas to Cane for a price of $116 per unit. What is the financial advantage (disadvantage) of buying 59,000 units from the supplier instead of making those units?

11. How many pounds of raw material are needed to make one unit of each of the two products?

12. What contribution margin per pound of raw material is earned by each of the two products?

13. Assume Canes customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume the raw material available for production is limited to 220,000 pounds. How many units of each product should Cane produce to maximize its profits?

14. Assume Canes customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume the raw material available for production is limited to 220,000 pounds. What is the total contribution margin Cane Company will earn?

15. Assume Canes customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume the companys raw material available for production is limited to 220,000 pounds. If Cane uses its 220,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials?