#5

Cane Company manufactures two products called Alpha and Beta that sell for $150 and $110, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 108,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	30			$	15
Direct labor			26				22
Variable manufacturing overhead			13				11
Traceable fixed manufacturing overhead			22				24
Variable selling expenses			18				14
Common fixed expenses			21				16
Total cost per unit		$	130			$	102

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.

Required:

Assume that Cane normally produces and sells 96,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? (Input the amount as positive value.)