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Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha
Beta
Direct materials
$ 40
$ 24
Direct labor
38
34
Variable manufacturing overhead
25
23
Traceable fixed manufacturing overhead
33
36
Variable selling expenses
30
26
Common fixed expenses
33
28
Total cost per unit
$ 199
$ 171
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.
15. Assume that Canes customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the companys raw material available for production is limited to 248,000 pounds. If Cane uses its 248,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)
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