0 13 Required information The Foundational 15 [(LO12-2, LO012-3, LO12-4, LO12-5,

Question

0 13 Required information The Foundational 15 [(LO12-2, LO012-3, LO12-4, LO12-5, LO12-6 [The following information applies to the questions displayed below. Part 13 of 15 Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of rew material that costs $5 per pound. The company has the capacity to annually produce 108,000 units of each product. Its average cost per unit for each product at this level of activity are given below 0.26 points Alpha Beta s30 15 Direct naterials Direot labor Variable nanufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit 26 13 18 21 $130 24 14 16 $102 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. Foundational 12-13 13. Assume that Cane's customers would buy a maximum of 86,000 units of Alpha and 66,000 units of Beta. Also assume that the company's raw material available for production is limited to 210,000 pounds. How many units of each product should Cane produce to maximize its profits? Units produced

Explanation / Answer

Alpha Beta Direct materials cost per unit 30 15 cost of material per pound 5 5 total pounds required for oneunit 6 3 Contribution margin Alpha Beta Selling price per unit 150 110 less:Variable expense Direct materials 30 15 Direct labor 26 22 VMOH 13 11 variable selling expense 18 14 total variable expense 87 62 contribution per unit 63 48 tota pounds of raw materials 6 3 contibution margin per pound 10.5 16 Ranking ii i units of Beta to be produced 66000*3 = 198000 pounds units of alpha to be produced (210000-198000)= 12000 pounds left so in 12000 pounds /6 = 2000 units Alpha Beta units produced 2000 66,000

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