Question
Please answer the questions which number 9 to 12. [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha
Please answer the questions which number 9 to 12.
[The following information applies to the questions displayed below.] |
Cane Company manufactures two products called Alpha and Beta that sell for $195 and $150, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 123,000 units of each product. Its unit costs for each product at this level of activity are given below: |
Alpha | Beta | |||||||
Direct materials | $ | 40 | $ | 15 | ||||
Direct labor | 34 | 28 | ||||||
Variable manufacturing overhead | 22 | 20 | ||||||
Traceable fixed manufacturing overhead | 30 | 33 | ||||||
Variable selling expenses | 27 | 23 | ||||||
Common fixed expenses | 30 | 25 | ||||||
Total cost per unit | $ | 183 | $ | 144 | ||||
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. |
9. | Assume that Cane expects to produce and sell 95,000 Alphas during the current year. A supplier has offered to manufacture and deliver 95,000 Alphas to Cane for a price of $140 per unit. If Cane buys 95,000 units from the supplier instead of making those units, how much will profits increase or decrease? |
11. | How many pounds of raw material are needed to make one unit of Alpha and one unit of Beta? |
12. | What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.) |
13. | Assume that Canes customers would buy a maximum of 95,000 units of Alpha and 75,000 units of Beta. Also assume that the companys raw material available for production is limited to 245,000 pounds. How many units of each product should Cane produce to maximize its profits? |
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