Required information The Foundational 15 [LO12-2, LO12-3, LO12-4, LO12-5, LO12-6

Question

Required information The Foundational 15 [LO12-2, LO12-3, LO12-4, LO12-5, LO12-6] The following information applies to the questions displayed below.] 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: Beta $ 18 25 15 28 18 20 $124 Alpha Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses $ 30 30 20 26 25 Total cost per unit $153 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

Explanation / Answer

Req 1: Alpha Beta Selling price per unit 170 130 Less: Variable cost Material 30 18 labour 30 25 variable Mmanufacturing OH 20 15 Selling expense 22 18 Contribution margin per unit 68 54 Number of pounds of material per unit 5 3 (30/6) (18/6) Contribution margin per pound 13.6 18 Req 14: Total Alpha Beta Maximum Demand 90,000 70,000 Material required per unit 5 3 Pounds required 660,000 450000 210,000 Available Pounds 221000 Beta 210000 210,000 Aviable pounds for Alpha 11000 11000 Total Pounds used 221000 11000 210,000 Contribution earned per pound 13.6 18 Total contribution earned 3929600 149600 3780000 Total contribution earned: $ 3929,600 Rreq 15 Additional pound will be utilized in production of Alpha. Therefore, the price paid for additional pound is as follows: Price already paid 6 Contribution per pound 13.6 maximum Price ready to pay 19.6

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