Cane Company manufactures two products called Alpha and Beta that sell for $120

Question

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 unit costs 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 16 18 Variable selling expenses 12 8 Common fixed expenses 15 10 -------------------------------------------------------------------------------- Total cost per unit $ 100 $ 68 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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. Required: What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line? Alpha? ___________ Beta? _________

Explanation / Answer

Traceable fixed overhead: Alpha: 16 per unit at a level of 100,000 units = 16*100,000 = 1,600,000 Beta: 18 per unit at a level of 100,000 units = 18*100,000 = 1,800,000 answer: Alpha: $1,600,000 Beta: $1,800,000

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