splayed below. anufactures two products called Alpha and Beta that sell for $120 of raw material that costs $6 per pound. The company has the c uct. Its average cost per unit for each product at this level of activ Alpha Beta

Cornerstones of Cost Management (Cornerstones Series)
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Chapter19: Capital Investment
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Required information
The Foundational 15 (Static) [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6)
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product
uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000
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
Total cost per unit
Units produced
Alpha
$ 30
20
7
Alpha
16
12
15
$ 100
Beta
Beta
$ 12
15
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.
INLES
18
8
Foundational 13-13 (Static)
13. Assume that Cane's customers would buy a maximum of 80,000 units of Alpha and 60,000 units of Beta. Also assume that the raw
material available for production is limited to 160,000 pounds. How many units of each product should Cane produce to maximize its
profits?
10
$.68
Transcribed Image Text:Required information The Foundational 15 (Static) [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6) [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 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 Total cost per unit Units produced Alpha $ 30 20 7 Alpha 16 12 15 $ 100 Beta Beta $ 12 15 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. INLES 18 8 Foundational 13-13 (Static) 13. Assume that Cane's customers would buy a maximum of 80,000 units of Alpha and 60,000 units of Beta. Also assume that the raw material available for production is limited to 160,000 pounds. How many units of each product should Cane produce to maximize its profits? 10 $.68
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