bCane Company manufactures two products called Alpha and Beta that sell for $ and $ respectively. Each product uses only one type of raw material that costs $ per pound. The company has the capacity to annually produce units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha Beta
Direct materials $ $
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Total cost per unit $ $
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.
Assume that Cane expects to produce and sell Betas during the current year. One of Canes sales representatives has found a new customer who is willing to buy additional Betas for a price of $ per unit. What is the financial advantage disadvantage of accepting the new customer's order?
