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 Direct materials $12 Direct labor 21 20 Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses 8 6 17 19 13 9 16 11 $105 $77 Total cost per unit 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

Solution

	Alpha	Beta
Contribution margin per Pound	$         10.60	$      19.00

Working

Details	Alpha	Beta
Direct Material per unit ($)	$         30.00	$      12.00
Raw material rate per pound ($)	$           6.00	$        6.00
Pounds of raw material per unit	5	2
Details	Alpha	Beta
Sales price	$       125.00	$      85.00
Variable cost per unit:
Direct material	$         30.00	$      12.00
Direct labor	$         21.00	$      20.00
variable Manufacturing overhead	$           8.00	$        6.00
Variable selling expenses	$         13.00	$        9.00
Total variable cost	$         72.00	$      47.00
Contribution margin per unit	$         53.00	$      38.00
	Alpha	Beta
Raw material required per unit	5	2
Contribution margin per Pound	$         10.60	$      19.00