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Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120,...

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Accounting

Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

Alpha Beta
Direct materials $ 30 $ 10
Direct labor 22 29
Variable manufacturing overhead 20 13
Traceable fixed manufacturing overhead 24 26
Variable selling expenses 20 16
Common fixed expenses 23 18
Total cost per unit $ 139 $ 112

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.

14. Assume that Canes customers would buy a maximum of 88,000 units of Alpha and 68,000 units of Beta. Also assume that the raw material available for production is limited to 172,000 pounds. What is the total contribution margin Cane Company will earn?

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