Question
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
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: |
Alpha | Beta | |||||||
Direct materials | $ | 30 | $ | 12 | ||||
Direct labor | 20 | 15 | ||||||
Variable manufacturing overhead | 7 | 5 | ||||||
Traceable fixed manufacturing overhead | 16 | 18 | ||||||
Variable selling expenses | 12 | 8 | ||||||
Common fixed expenses | 15 | 10 | ||||||
Total cost per unit | $ | 100 | $ | 68 | ||||
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: |
How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta? |
Alpha | Beta | |
Pounds of raw materials per unit | ||
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