Question

Required information [The following information applies to the questions displayed below.) 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 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit 17 19 16 11 $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. What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.) Alpha Beta Contribution margin per pound

Answer 1

ANSWER:

	Alpha	Beta
Selling price per unit	$125	$85
Variable cost per unit: Direct material Direct labor Variable manufacturing overhead Variable selling expenses	. $30 $21 $8 $13	. $12 $20 $6 $9
Total variable cost per unit	$72	$47
Contribution margin per unit	$53	$38
Raw material required per unit in pounds	($30/$6) = 5	($12/$6) = 2
Contribution margin per raw material pound	$10.6 per pound	$19 per pound