Question
Please ignore the value in the cells. [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta
Please ignore the value in the cells.
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha | Beta | |||||||
Direct materials | $ | 32 | $ | 16 | ||||
Direct labor | 24 | 19 | ||||||
Variable manufacturing overhead | 10 | 9 | ||||||
Traceable fixed manufacturing overhead | 20 | 22 | ||||||
Variable selling expenses | 16 | 12 | ||||||
Common fixed expenses | 19 | 14 | ||||||
Total cost per unit | $ | 121 | $ | 92 | ||||
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.
8. Assume that Cane normally produces and sells 64,000 Betas and 84,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 19,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line? Financial advantage (262,000) Foundational 12-12 What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.) Alpha $ 17.00 22.00 Beta Contribution margin per pound 13. Assume that Cane's customers would buy a maximum of 84,000 units of Alpha and 64,000 units of Beta. Also assume that the company's raw material available for production is limited to 166,000 pounds. How many units of each product should Cane produce to maximize its profits? Alpha Beta Units produced 64,000 9,500 14. Assume that Cane's customers would buy a maximum of 84,000 units of Alpha and 64,000 units of Beta. Also assume that the company's raw material available for production is limited to 166,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials? $ 1,297,000 Total contribution margin 15. Assume that Cane's customers would buy a maximum of 84,000 units of Alpha and 64,000 units of Beta. Also assume that the company's raw material available for production is limited to 166,000 pounds. If Cane uses its 166,000 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.) S23.00 Maximum price to be paid per poundStep by Step Solution
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