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Firefox File Edit View History Bookmarks Tools Window Help CSUF Portal - Home XTITANilum Chap 10: HmWrk (Part 01) | ??ezto.mheducation.com/hm.tpx?.0.24635292464721661522.. Your Firefox is critically out of date. An update is required to stay secure Update Now ? connect ACCT 2018 Hoffman Spring 2018: CCT 201B Hoffman Spring 2018 ACCOUNTING p 10: HmWrk (Part 01) Questions 1-15 (of 15) ? The following information applies to the questions displayed below 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 unit costs for each product at this level of activity are given below Alpha Beta $40 15 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit $163 $130 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. 0.66 points Required 431222

Explanation / Answer

12)

Contribution Margin per pound

Alpha

Beta

Unit Selling Price

$175

$135

Variable Cost per unit:

Direct material cost per unit

$40

$15

Direct labor

$30

$30

Variable manufacturing overhead

$18

$16

Variable Selling Expenses

$23

$19

Total Variable Cost per unit

$111

$80

Contribution Margin Per Unit

(Sales - Variable Cost)

$64

$55

Required Raw Material in pounds per unit

(Direct Material cost / $5 per pound)

8 Pounds

($40 / $5)

3 Pounds

(15/5)

Contribution Margin per pound

$8.00

$18.33

15)

Available raw materials for production is 225,000 pounds

From the calculation of part 12 it is clear that Beta has higher contribution margin per pound. So the company will make Beta product first and then Alpha in case of scarcity of raw material since Beta providing highest contribution margin or profit per pound.

So, the material 225,000 pounds is sufficient to complete the demand of beta 71,000 Units. Hence the Maximum price to be paid per pound = $8 per pound

Since the company is required to complete the demand of Alpha Product and to do this they requires raw material. So the maximum amount that a company may pay per pound $8 per pound

Or

Alternative if this part is independent; the maximum price to be paid per pound is $18.33

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Alpha

Beta

Unit Selling Price

$175

$135

Variable Cost per unit:

Direct material cost per unit

$40

$15

Direct labor

$30

$30

Variable manufacturing overhead

$18

$16

Variable Selling Expenses

$23

$19

Total Variable Cost per unit

$111

$80

Contribution Margin Per Unit

(Sales - Variable Cost)

$64

$55

Required Raw Material in pounds per unit

(Direct Material cost / $5 per pound)

8 Pounds

($40 / $5)

3 Pounds

(15/5)

Contribution Margin per pound

$8.00

$18.33

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