Question
Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material
Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 32 | $ | 16 | ||||
Direct labor | 24 | 19 | ||||||
Variable manufacturing overhead | 10 | 9 | ||||||
Traceable fixed manufacturing overhead | 20 | 22 | ||||||
Variable selling expenses | 16 | 12 | ||||||
Common fixed expenses | 19 | 14 | ||||||
Total cost per unit | $ | 121 | $ | 92 | ||||
|
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.
13a. Assume that Canes customers would buy a maximum of 84,000 units of Alpha and 64,000 units of Beta. Also assume that the raw material available for production is limited to 166,000 pounds. How many units of each product should Cane produce to maximize its profits for Alpha and Beta?
13b.Assume that Canes customers would buy a maximum of 84,000 units of Alpha and 64,000 units of Beta. Also assume that the raw material available for production is limited to 166,000 pounds. What total contribution margin will it earn?
13c. Assume that Canes customers would buy a maximum of 84,000 units of Alpha and 64,000 units of Beta. Also assume that the raw material available for production is limited to 166,000 pounds. If Cane uses its 166,000 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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started