Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Alpha $ 40 Beta $ 24 Direct labour 34 28 Variable manufacturing overhead 21 19 Traceable fixed manufacturing overhead 29 32 Variable selling expenses 26 22 Common fixed expenses Cost per unit 29 24 $179 $149 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. 4. Assume that Cane's customers would buy a maximum of 94,000 units of Alpha and 74,000 units of Beta. Also assume that the ompany's raw material available for production is limited to 228,000 pounds. What is the maximum contribution margin Cane ompany can earn given the limited quantity of raw materials? Total contribution margin 5. Assume that Cane's customers would buy a maximum of 94,000 units of Alpha and 74,000 units of Beta. Also assume that the company's raw material available for production is limited to 228,000 pounds. Up to how much should it be willing to pay per pound or additional raw materials? (Round your answer to 2 decimal places.)
Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Alpha $ 40 Beta $ 24 Direct labour 34 28 Variable manufacturing overhead 21 19 Traceable fixed manufacturing overhead 29 32 Variable selling expenses 26 22 Common fixed expenses Cost per unit 29 24 $179 $149 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. 4. Assume that Cane's customers would buy a maximum of 94,000 units of Alpha and 74,000 units of Beta. Also assume that the ompany's raw material available for production is limited to 228,000 pounds. What is the maximum contribution margin Cane ompany can earn given the limited quantity of raw materials? Total contribution margin 5. Assume that Cane's customers would buy a maximum of 94,000 units of Alpha and 74,000 units of Beta. Also assume that the company's raw material available for production is limited to 228,000 pounds. Up to how much should it be willing to pay per pound or additional raw materials? (Round your answer to 2 decimal places.)
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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