Alpha:

Direct materials ......... $30

Direct labor.......... 20

Variable manufacturing overhead.... 7

Traceable fixed manufacturing overhead... 16

Variable selling expenses..... 12

Common fixed expenses...... 15

Total cost per unit....... 100

Beta:

Direct materials ......... $12

Direct labor.......... 15

Variable manufacturing overhead.... 5

Traceable fixed manufacturing overhead... 18

Variable selling expenses..... 8

Common fixed expenses...... 10

Total cost per unit....... 68

A and B sell for $120 and $80, respectively. Each product uses raw material that costs $6/pound. The company has the capacity to produce 100,000 units of each product annually.

1. If the company produces and sells 45,200 betas a year, what is the financial advantage (disadvantage) in discontinuing the beta line?

2. If the company produces and sells 44,000 betas a year, what is the financial advantage (disadvantage) in discontinuing the beta line?

3. If the company discontinues selling 60,000 betas a year, and the sales of the alpha line could be increased by 12,000 units, what is the financial advantage (disadvantage) of doing so?

4. The company expects to sell 80,000 of alpha. A supplier has offered to produce and deliver 80,000 alphas to the company at $77.50/unit. What is the financial advantage (disadvantage) of accepting this offer?

5. The company expects to produce and sell 50,000 alphas. A supplier has offered to produce and deliver 50,000 alphas to the company at $89.50/unit. What is the financial advantage (disadvantage) of accepting this offer?