Question

The Foundational 15 [LO12-2, LO12-3, LO12-4, LO12-5, LO12-6] [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $180 and $145, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 36 $ 24 Direct labor 32 27 Variable manufacturing overhead 19 17 Traceable fixed manufacturing overhead 27 30 Variable selling expenses 24 20 Common fixed expenses 27 22 Total cost per unit $ 165 $ 140 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. Foundational 12-11 11. How many pounds of raw material are needed to make one unit of each of the two products

Answer 1

Cane Company

A. Pounds of raw materials to make one unit of Alpha and Beta each:

i) Alpha = cost of direct materials per unit divided by cost per pound

= $36/$6 = 6 pounds

ii) Beta = cost of direct materials per unit divided by cost per pound

= $24/$6 = 4 pounds

Step-by-step explanation:

The pound required to produce a unit of each product can be obtained by looking at the unit cost of a product and the per pound cost given in the question.

Dividing the unit cost by the per-pound cost gives the number of pounds bought for each product.