Question

Required information The following information applies to the questions displayed below.) of 15 Cane Company manufactures two products called Alpha and Beta that sell for $125 and $85, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 101,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha $ 30 Beta $12 Dok Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit SK $105 $77 ences 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. 15. Assume that Cane's customers would buy a maximum of 81,000 units of Alpha and 61,000 units of Beta. Also assume that the company's raw material available for production is limited to 161,000 pounds. If Cane uses its 161,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.) Maximum price to be paid per pound

Answer 1

Contribution margin per pound

	Alpha	Beta
Selling price	125	85
Variable cost	72	47
contribution margin	53	38
Pound per unit	5	2
Contribution margin per pound	10.60	19

Maximum price per pound = 6+10.60 = 16.60 per pound