Chec × Ashley Cezto.mheducation.com/hm.tpx?-=0.3967218686745263-1 5 1 1 97806436
ID: 2583163 • Letter: C
Question
Chec × Ashley Cezto.mheducation.com/hm.tpx?-=0.3967218686745263-1 5 1 1 978064366 Required information 1.00 points 14. Assume that Cane's customers would buy a maximum of 80,000 units of Alpha and 60,000 units of Beta. Also assume that the company's raw material available for production is limited to 160,000 pounds. What is the maximum contribution margin Cane Company can eam given the limited quantity of raw materials? I contribution margirn Required Informati orn [The following information appWes to the questions displayed below 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: References eBook & Resources Worksheet Learning Objective: 12-03 Prepare a make or buy analysis Difficulty: 2 Medium Learning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted. Alpha $ 30 20 Beta $ 12 15 Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped. Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Learning Objective: 12-05 Determine the most profitable use of a constrained 16 12 15 18 10 Total cost per unit $100 $ 68Explanation / Answer
As the available raw material is limited, Cane company gets benefited by producing all the 60,000 units of Beta which has the highest contribution per unit and the remaining units of Alpha.
Units of Beta = 60,000
Raw materials required for Beta = 60,000*2 = 120,000
Raw materials available for Alpha = 160,000 - 120,000 = 40,000
Units of Alpha = 40,000/5 = 8,000
Alpha Beta Selling price per unit (a) 120 80 Variable costs per unit (b) : Direct materials 30 12 Direct labour 20 15 Variable manufacturing overhead 7 5 Variable selling expenses 12 8 Contribution margin per unit (c) = (a-b) 51 40