The following Information applies to the questions displayed below.j Cane Compan
ID: 2579869 • Letter: T
Question
The following Information applies to the questions displayed below.j Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively Each product uses only one type of raw materlal that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its unit costs for each product at this level of activity are given below Direct materlals Direct labor Varlable manufacturing overhead Traceable fixed manufacturing overhead Varlable selling expenses Common fixed expenses Alpha Beta $40 $ 24 28 19 32 21 29 26 29 Total cost per unit $179 $149 The company conslders its traceable fixed manufacturing overhead to be avoldable, whereas Its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.Explanation / Answer
CANE COMPANY: Alpha Beta 12) Selling price per unit $ 190.00 $ 155.00 Variable expenses: Direct materials $ 40.00 $ 24.00 Direct labor $ 34.00 $ 28.00 Variable manufacturing overhead $ 21.00 $ 19.00 Variable selling expenses $ 26.00 $ 22.00 Total variable expenses $ 121.00 $ 93.00 Contribution margin $ 69.00 $ 62.00 Pounds of raw material required per unit $ 5.00 $ 3.00 Contribution margin per pound of raw material $ 13.80 $ 20.67 Answer 14) As Beta gives higher CM per pound of the raw material, it should be produced to the maximum extent possible. So 74000 units of Beta should be produced using 74000*3 = 222000 pounds of raw material. Balance raw material of 6000 pounds (228000-222000) should be used to produce 6000/5 = 1200 Units of Alpha. Total contribution margin: Beta = 74000*60 = $ 4,440,000 Alpha = 1200*69 = $ 7,200 Total contribution margin $ 4,447,200 Answer 15) Maximum price for additional raw material per pound = Present price+CM per pound of raw material for Alpha = 8+13.80 =21.80 $ 21.80 Answer