ompany manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 30 $ 10 Direct labor 22 29 Variable manufacturing overhead 20 13 Traceable fixed manufacturing overhead 24 26 Variable selling expenses 20 16 Common fixed expenses 23 18 Total cost per unit $ 139 $ 112 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.
ompany manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 30 $ 10 Direct labor 22 29 Variable manufacturing overhead 20 13 Traceable fixed manufacturing overhead 24 26 Variable selling expenses 20 16 Common fixed expenses 23 18 Total cost per unit $ 139 $ 112 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.
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 5EA: Rose Company has a relevant range of production between 10,000 and 25.000 units. The following cost...
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Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
| Alpha | Beta | |||||||
| Direct materials | $ | 30 | $ | 10 | ||||
| Direct labor | 22 | 29 | ||||||
| Variable manufacturing overhead | 20 | 13 | ||||||
| Traceable fixed manufacturing overhead | 24 | 26 | ||||||
| Variable selling expenses | 20 | 16 | ||||||
| Common fixed expenses | 23 | 18 | ||||||
| Total cost per unit | $ | 139 | $ | 112 | ||||
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.
Question:
Assume that Cane’s customers would buy a maximum of 88,000 units of Alpha and 68,000 units of Beta. Also assume that the company’s raw material available for production is limited to 172,000 pounds. If Cane uses its 172,000 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.)
![Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $185 and
$120, respectively. Each product uses only one type of raw material that costs $5 per
pound. The company has the capacity to annually produce 112,000 units of each
product. Its average cost per unit for each product at this level of activity are given
below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Alpha
$ 30
22
20
24
20
23
Beta
$ 10
29
13
26
16
18
Total cost per unit
$139
$112
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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4069fa52-b27a-46d1-ae2b-57cc56c25309%2F5e678910-de88-46b7-9580-7be640a26220%2F0xrrfg99_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $185 and
$120, respectively. Each product uses only one type of raw material that costs $5 per
pound. The company has the capacity to annually produce 112,000 units of each
product. Its average cost per unit for each product at this level of activity are given
below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Alpha
$ 30
22
20
24
20
23
Beta
$ 10
29
13
26
16
18
Total cost per unit
$139
$112
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.
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