Cane company manufactures two products called alpha and beta that sell for $125 and $85, respectively. each product uses only one type of raw material that costs $6 per pound. the company has the capacity to annually produce 101,000 units of each product. its average cost per unit for each product at this level of activity are given below:

alpha beta
direct materials $ 30 $12
direct labor 21 20
variable manufacturing overhead 8 6
traceable fixed manufacturing overhead 17 19
variable selling expenses 13 9
common fixed expenses 16 11
total cost per unit $105 $77

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.

questions: 5. assume that cane expects to produce and sell 96,000 alphas during the current year. one of cane's sales representatives has found a new customer who is willing to buy 11,000 additional alphas for a price of $84 per unit; however pursuing this opportunity will decrease alpha sales to regular customers by 6,000 units.

(a) what is the financial advantage (disadvantage) of accepting the new customer’s order?
(b) based on your calculations above should the special order be accepted?

Exercise 18-15 sheffield appliance center is an experienced home appliance dealer. sheffield appliance center also offers a number of services for the home appliances that it sells. assume that sheffield appliance center sells ovens on a standalone basis. sheffield appliance center also sells installation services and maintenance services for ovens. however, sheffield appliance center does not offer installation or maintenance services to customers who buy ovens from other vendors. pricing for ovens is as follows. oven only $790 oven with installation service 850 oven with maintenance services 970 oven with installation and maintenance services 990 in each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $180. additionally, the incremental amount charged by sheffield appliance center for installation approximates the amount charged by independent third parties. ovens are sold subject to a general right of return. if a customer purchases an oven with installation and/or maintenance services, in the event sheffield appliance center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $790. assume that a customer purchases an oven with both installation and maintenance services for $990. (b) indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract.