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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 unit costs 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 deemed unavoidable and have been allocated to products based on sales dollars. 3. Assume that Cane expects to produce and sell 88,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 18,000 additional Alphas for a price of $112 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease? Net operating income increases by 4. Assume that Cane expects to produce and sell 98,000 Betas during the current year. One of Canes sales representatives has found a new customer that is willing to buy 4,000 additional Betas for a price of $47 per unit. If Cane accepts the customers offer, how much will its profits increase or decrease? Net operating income decreases by 5. What contribution margin per pound of raw material is earned by Alpha and Beta? (Round your answers to 2 decimal places.) Alpha Beta Contribution margin per pound 6. Assume that Canes customers would buy a maximum of 88,000 units of Alpha and 68,000 units of Beta. Also assume that the companys raw material available for production is limited to 172,000 pounds. How many units of each product should Cane produce to maximize its profits? Alpha Beta Units produced 7. Assume that Canes customers would buy a maximum of 88,000 units of Alpha and 68,000 units of Beta. Also assume that the companys raw material available for production is limited to 172,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials? Total contribution margin 8. Assume that Canes customers would buy a maximum of 88,000 units of Alpha and 68,000 units of Beta. Also assume that the companys raw material available for production is limited to 172,000 pounds. Up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.) Maximum price to be paid per pound

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