Cane Company manufactures two products called Alpha and Beta that sell for $125 and $85, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 101,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	30			$	12
Direct labor			21				20
Variable manufacturing overhead			8				6
Traceable fixed manufacturing overhead			17				19
Variable selling expenses			13				9
Common fixed expenses			16				11
Total cost per unit		$	105			$	77

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 41,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

8. Assume that Cane normally produces and sells 61,000 Betas and 81,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 16,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

9. Assume that Cane expects to produce and sell 81,000 Alphas during the current year. A supplier has offered to manufacture and deliver 81,000 Alphas to Cane for a price of $84 per unit. What is the financial advantage (disadvantage) of buying 81,000 units from the supplier instead of making those units?

10. Assume that Cane expects to produce and sell 51,000 Alphas during the current year. A supplier has offered to manufacture and deliver 51,000 Alphas to Cane for a price of $84 per unit. What is the financial advantage (disadvantage) of buying 51,000 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?

13. Assume that Canes customers would buy a maximum of 81,000 units of Alpha and 61,000 units of Beta. Also assume that the companys raw material available for production is limited to 161,000 pounds. How many units of each product should Cane produce to maximize its profits?

14. Assume that Canes customers would buy a maximum of 81,000 units of Alpha and 61,000 units of Beta. Also assume that the companys raw material available for production is limited to 161,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

15. Assume that Canes customers would buy a maximum of 81,000 units of Alpha and 61,000 units of Beta. Also assume that the companys raw material available for production is limited to 161,000 pounds. If Cane uses its 161,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials?