Question
Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product uses only one type of raw material
Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 110,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha Beta Direct materials$ 24$ 12
Direct labor 2326
Variable manufacturing overhead2212
Traceable fixed manufacturing overhead2325
Variable selling expenses1915
Common fixed expenses2217
Total cost per unit$ 133$ 107
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.
15. Assume that Cane's customers would buy a maximum of 87,000 units of Alpha and 67,000 units of Beta. Also assume that the raw material available for production is limited to 168,000 pounds. If Cane uses its 168,000 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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