Question

Required information The following information applies to the questions displayed below.) 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 20 8 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit $105 $77 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. 13. 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. How many units of each product should Cane produce to maximize its profits? Alpha Beta Units produced

Answer 1

Answer:

	Alpha	Beta
Contribution Margin (125-30-21-8-13)(85-12-20-6-9)	53	38
Raw material required(30/6)(12/6)	5	2
Contribution Per unit of raw material	10.6	19
First 200000 pounds must be allocated to beta as it has more contribution margin per unit
Beta (61000*2)	1,22,000
Alpha(200000-122000)	78,000
	Alpha	Beta
Units produced(78000/5),(122000/2)	15,600	61,000