Cane Company manufactures two products called Alpha and Beta that sell for $215 and $160, respectively. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its average cost per unit for each product at this level of activity are given below: AlphaBetaDirect materials$ 42$ 21Direct labor3528Variable manufacturing overhead2321Traceable fixed manufacturing overhead3134Variable selling expenses2824Common fixed expenses3126Total cost per unit$ 190$ 154 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. Required:What is the total amount of traceable fixed manufacturing overhead for each of the two products?Assume that Cane expects to produce and sell 106,000 Betas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 4,000 additional Betas for a price of $74 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

Lets understand the basics. Traceable overhead is a overhead which can be traced on the product. In…

Answered: Cane Company manufactures two products…

Principles of Accounting Volume 2

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Chapter6: Activity-based, Variable, And Absorption Costing

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Cane Company manufactures two products called Alpha and Beta that sell for $215 and $160, respectively. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

	Alpha	Beta
Direct materials	$ 42	$ 21
Direct labor	35	28
Variable manufacturing overhead	23	21
Traceable fixed manufacturing overhead	31	34
Variable selling expenses	28	24
Common fixed expenses	31	26
Total cost per unit	$ 190	$ 154

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.

Required:

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

Assume that Cane expects to produce and sell 106,000 Betas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 4,000 additional Betas for a price of $74 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

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