Cane Company manufactures two products called Alpha and Beta that sell for $165
ID: 2474021 • Letter: C
Question
Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its unit costs for each product at this level of activity are given below:
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.
What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.)
Assume that Cane’s customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume that the company’s raw material available for production is limited to 220,000 pounds. How many units of each product should Cane produce to maximize its profits?
Assume that Cane’s customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume that the company’s raw material available for production is limited to 220,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?
Assume that Cane’s customers would buy a maximum of 89,000 units of Alpha and 69,000 units of Beta. Also assume that the company’s raw material available for production is limited to 220,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)
Alpha Beta Direct materials $ 40 $ 24 Direct labor 29 25 Variable manufacturing overhead 15 14 Traceable fixed manufacturing overhead 25 27 Variable selling expenses 21 17 Common fixed expenses 24 19 Total cost per unit $ 154 $ 126Explanation / Answer
12)
13)Pounds consumed in producing beta = 69000 units = 69000* 3 = 207000
Remaining pounds of (220000-207000) = 13000 will be consumed to produce alpha = 13000 /5 = 2600 units
14)Maximum contribution = (69000* 50)+(2600*60)
= 3450000+ 156000
= 3,606,000
15) Pounds required to produce additional units of alpha = 89000-2600 = 86400* 5 = 432000
it is willing to pay $ 12 as additional contribution derives from it .
Alpha Beta Selling price 165 130 Less:variable cost Direct material 40 24 Direct labor 29 25 Variable overhead 15 14 Variable selling 21 17 contribution margin 60 50 Per pound required 40/8 = 5 24/8 = 3 contribution per pound 60/5 = 12 50/3 = 16.67 Ranking 2 1