Question
Cane Company manufactures two products called Alpha and Beta that sell for $135 and $95, respectively. Each product uses only one type of raw material
Cane Company manufactures two products called Alpha and Beta that sell for $135 and $95, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 105,000 units of each product. Its unit costs for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 30 | $ | 18 | ||||
Direct labor | 23 | 16 | ||||||
Variable manufacturing overhead | 10 | 8 | ||||||
Traceable fixed manufacturing overhead | 19 | 21 | ||||||
Variable selling expenses | 15 | 11 | ||||||
Common fixed expenses | 18 | 13 | ||||||
Total cost per unit | $ | 115 | $ | 87 | ||||
What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.) Assume that Canes customers would buy a maximum of 83,000 units of Alpha and 63,000 units of Beta. Also assume that the companys raw material available for production is limited to 200,000 pounds. How many units of each product should Cane produce to maximize its profits? Assume that Canes customers would buy a maximum of 83,000 units of Alpha and 63,000 units of Beta. Also assume that the companys raw material available for production is limited to 200,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials? Assume that Canes customers would buy a maximum of 83,000 units of Alpha and 63,000 units of Beta. Also assume that the companys raw material available for production is limited to 200,000 pounds. 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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