Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130,...
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Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 30 20 26 22 25 $153 Beta $ 18 25 15 28 18 20 $124 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. 4. Assume that Cane expects produce and sell 100,000 Betas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 3,000 additional Betas for a price of $49 per unit. If Cane accepts the customer's offer, how much will its profits increase or decrease? Net operating income by
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