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Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively. Each product uses only one type of raw material

Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 117,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

Alpha Beta
Direct materials $ 40 $ 15
Direct labor 30 30
Variable manufacturing overhead 18 16
Traceable fixed manufacturing overhead 26 29
Variable selling expenses 23 19
Common fixed expenses 26 21
Total cost per unit $ 163 $ 130

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.

7. Assume that Cane normally produces and sells 51,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

8. Assume that Cane normally produces and sells 71,000 Betas and 91,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

9. Assume that Cane expects to produce and sell 91,000 Alphas during the current year. A supplier has offered to manufacture and deliver 91,000 Alphas to Cane for a price of $124 per unit. What is the financial advantage (disadvantage) of buying 91,000 units from the supplier instead of making those units?

10. Assume that Cane expects to produce and sell 61,000 Alphas during the current year. A supplier has offered to manufacture and deliver 61,000 Alphas to Cane for a price of $124 per unit. What is the financial advantage (disadvantage) of buying 61,000 units from the supplier instead of making those units?

11. How many pounds of raw material are needed to make one unit of each of the two products?

12. What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.)

13. Assume that Canes customers would buy a maximum of 91,000 units of Alpha and 71,000 units of Beta. Also assume that the raw material available for production is limited to 225,000 pounds. How many units of each product should Cane produce to maximize its profits?

14. Assume that Canes customers would buy a maximum of 91,000 units of Alpha and 71,000 units of Beta. Also assume that the raw material available for production is limited to 225,000 pounds. What is the total contribution margin Cane Company will earn?

15. Assume that Canes customers would buy a maximum of 91,000 units of Alpha and 71,000 units of Beta. Also assume that the companys raw material available for production is limited to 225,000 pounds. If Cane uses its 225,000 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.)

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