Ask Question
7 March, 01:35

Assume that Cane expects to produce and sell 88,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 18,000 additional Alphas for a price of $112 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

+4
Answers (1)
  1. 7 March, 01:45
    0
    Advantage = $360,000

    Explanation:

    Since fixed costs cannot be changed, it is unavoidable or irrelevant.

    We have to deduct the avoidable expenses from the revenue to find whether Cane accepts the order or not.

    Revenue ($112 x 18,000 units) = $2,016,000

    Less: Relevant Costs (Product costs)

    Direct Material $30 x 18,000 = $540,000

    Direct Labor $22 x 18,000 = $396,000

    Variable Manufacturing Overhead $20*18,000 = $360,000

    Variable Selling expenses $20*18,000 = $360,000

    Total Relevant costs $ (1,656,000)

    Financial advantage of accepting the new order $ 360,000

    Therefore, the company should accept the new order.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Assume that Cane expects to produce and sell 88,000 Alphas during the current year. One of Cane's sales representatives has found a new ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers