Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 units of each product. Its unit costs for each product at this level of activity are given below:

Alpha Beta

Direct materials $ 40 $ 24

Direct labor 37 30

manufacturing overhead 24 22

Traceable fixed manufacturing overhead 32 35

Variable selling expenses 29 25

Common fixed expenses 32 27

Total cost per unit $ 194 $ 163

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.

Required:

1. Assume that Cane expects to produce and sell 72,000 Alphas during the current year. A supplier has offered to manufacture and deliver 72,000 Alphas to Cane for a price of $148 per unit. If Cane buys 72,000 units from the supplier instead of making those units, how much will profits increase or decrease?

2. What contribution margin per pound of raw material is earned by Alpha and Beta?