### Required Information Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. Its average cost per unit for each product at this level of activity is given below: | Cost Component | Alpha | Beta | |----------------------------------------|-------|------| | Direct materials | $42 | $24 | | Direct labor | 42 | 32 | | Variable manufacturing overhead | 26 | 24 | | Traceable fixed manufacturing overhead | 34 | 37 | | Variable selling expenses | 31 | 27 | | Common fixed expenses | 34 | 29 | | Total cost per unit | $209 | $173 | 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. ### Problem Statement Assume that Cane's customers would buy a maximum of 99,000 units of Alpha and 79,000 units of Beta. Also assume that the raw material available for production is limited to 344,000 pounds. What total contribution margin will it earn? [Input Field: Total contribution margin]

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	Alpha	Beta
Sales Price	225	175
Variable costs:
Direct materials	42	24
Direct labor	42	32
Variable manufacturing overhead	26	24
Variable selling expense	31	27
Total Variable cost	141	107
Contribution margin per unit	84	68
/Pounds of raw material per unit	7	4
Contribution margin per pound	12.00	17.00
Ranking	II	I

Total pounds available of material		344000
Maximum Units of Beta	79000
Pounds per units of Beta	4
Total pounds used in Beta		316000
Remaining pounds for Alpha		28000
/Pounds per units of Alpha		7
Units of Alpha to produce		4000

	Alpha	Beta
Units to maximize profits	4000	79000