Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

15. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw

15. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 $ 18
Direct labor 30 25
Variable manufacturing overhead 20 15
Traceable fixed manufacturing overhead 26 28
Variable selling expenses 22 18
Common fixed expenses 25 20
Total cost per unit $ 153 $ 124

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.

Assume that Canes customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the raw material available for production is limited to 221,000 pounds. If Cane uses its 221,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

CIA Part 3 Business Knowledge For Internal Auditing 2021

Authors: MUHAMMAD ZAIN

1st Edition

B09B23JKZ8, 979-8739475527

More Books

Students also viewed these Accounting questions