Question

11. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130,...

11. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 $ 18
Direct labor 30 25
Variable manufacturing overhead 20 15
Traceable fixed manufacturing overhead 26 28
Variable selling expenses 22 18
Common fixed expenses 25 20
Total cost per unit $ 153 $ 124

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.

How many pounds of raw material are needed to make one unit of each of the two products?

12.

Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 $ 18
Direct labor 30 25
Variable manufacturing overhead 20 15
Traceable fixed manufacturing overhead 26 28
Variable selling expenses 22 18
Common fixed expenses 25 20
Total cost per unit $ 153 $ 124

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.

What contribution margin per pound of raw material is earned by each of the two products?

13.

Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 $ 18
Direct labor 30 25
Variable manufacturing overhead 20 15
Traceable fixed manufacturing overhead 26 28
Variable selling expenses 22 18
Common fixed expenses 25 20
Total cost per unit $ 153 $ 124

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.

Assume that Cane’s customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the raw material available for production is limited to 221,000 pounds. How many units of each product should Cane produce to maximize its profits?

14.

Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 $ 18
Direct labor 30 25
Variable manufacturing overhead 20 15
Traceable fixed manufacturing overhead 26 28
Variable selling expenses 22 18
Common fixed expenses 25 20
Total cost per unit $ 153 $ 124

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.

Assume that Cane’s customers would buy a maximum of 90,000 units of Alpha and 70,000 units of Beta. Also assume that the raw material available for production is limited to 221,000 pounds. What total contribution margin will it earn?

Homework Answers

Answer #1

Solution 11:

Pounds of raw material are needed to make one unit of Alpha = $30 / $6 = 5 pound
Pounds of raw material are needed to make one unit of Beta = $18 / $6 = 3 pound

Solution 12:

Computation of contribution margin per pound
Particulars Alpha Beta
Selling price per unit $170.00 $130.00
Variable cost per unit:
Direct material $30.00 $18.00
Direct labor $30.00 $25.00
Variable manufacturing overhead $20.00 $15.00
Variable selling expenses $22.00 $18.00
Contribution margin per unit $68.00 $54.00
Raw material required per unit (In pound) 5 3
Contribution margin per pound of material $13.60 $18.00
Rank 2 1

Solution 13:

As raw material quantity is limited, therefore raw material will be utilized first for product providing higher contribution margin per pound. Therefore nos of units of each product to be made to maximize profit;

Beta = 70000 units

Alpha = (221,000 - 70000*3) / 5 = 2200 units

Solution 14:

maximum contribution margin Cane Company can earn given the limited quantity of raw materials = Contribution margin from alpha + Contribution margin from Beta

= (2200 * $68) + (70000*$54)

= $3,929,600

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
7. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130,...
7. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 $ 18 Direct labor 30 25 Variable manufacturing overhead 20 15 Traceable fixed manufacturing...
9. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130,...
9. Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 116,000 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 $ 18 Direct labor 30 25 Variable manufacturing overhead 20 15 Traceable fixed manufacturing...
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively....
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 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 20 15 Variable manufacturing overhead 7 5 Traceable fixed manufacturing overhead...
Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively....
Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 25 $ 10 Direct labor 22 21 Variable manufacturing overhead 17 7 Traceable fixed manufacturing overhead...
Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively....
Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 40 $ 24 Direct labor 38 34 Variable manufacturing overhead 25 23 Traceable fixed manufacturing overhead...
Cane Company manufactures two products called Alpha and Beta that sell for $150 and $105, respectively....
Cane Company manufactures two products called Alpha and Beta that sell for $150 and $105, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 107,000 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 $ 10 Direct labor 25 20 Variable manufacturing overhead 12 10 Traceable fixed manufacturing overhead...
Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively....
Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 117,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 40 $ 15 Direct labor 30 30 Variable manufacturing overhead 18 16 Traceable fixed manufacturing overhead...
Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively.
Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 117,000 units of each product. Its average cost per unit for each product at this level of activity are given below:AlphaBetaDirect materials$40$15Direct labor3030Variable manufacturing overhead1816Traceable fixed manufacturing overhead2629Variable selling expenses2319Common fixed expenses2621Total cost per unit$163$130The company considers its traceable fixed manufacturing overhead...
Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively....
Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its unit costs for each product at this level of activity are given below:     Alpha   Beta Direct materials      $   40         $   24      Direct labor         34            28     ...
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively....
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 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         20           ...