question archive Cane company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively
Cane company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively
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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 unit costs for each product at this level of activity are given below:
Alpha Beta
Direct Materials $30 $12
Direct Labor 20 15
Variable manufacturing overhead 7 5
Traceable fixed manufacturing overhead 16 18
Variable selling expenses 12 8
Common fixed expenses 15 10
Total cost per unit $100 $68
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed 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 )
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Answer:
| Contribution margin : | |||
| particulars | Alpha | Beta | |
| Sales | 120 | 80 | |
| Less : variable costs | |||
| Direct material | 30 | 12 | |
| Direct labour | 20 | 15 | |
| variable manfacturing overhead | 7 | 5 | |
| Variable selling expense | 12 | 8 | |
| Contribution margin | 51 | 40 | |
| Contribution margin per pound : | |||
| particulars | Alpha | Beta | |
| Contribution margin | 51 | 40 | |
| Raw material required | 5 | 2 | |
| Contribution margin per unit of raw material | 10.2 | 20 | |
| Note : | |||
| Raw material required : | |||
| particulars | Alpha | Beta | |
| Direct material | 30 | 12 | |
| Cost of material per unit | 6 | 6 | |
| Raw material required | 5 | 2 | |
