Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its unit costs for each product at this level of activity are given below:
| Direct materials | $ | 30 | $ | 12 | ||||
| Direct labor | 20 | 15 | ||||||
| Variable manufacturing overhead | 7 | 5 | ||||||
| Traceable fixed manufacturing overhead | 16 | 18 | ||||||
| Variable selling expenses | 12 | 8 | ||||||
| Common fixed expenses | 15 | 10 | ||||||
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| Total cost per unit | $ | 100 | $ | 68 | ||||
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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. |
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Assume that Cane expects to produce and sell 50,000 Alphas during the current year. A supplier has offered to manufacture and deliver 50,000 Alphas to Cane for a price of $80 per unit. If Cane buys 50,000 units from the supplier instead of making those units, how much will profits increase or decrease?(Input the amount as positive value.) |