Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

 

	Alpha	Beta
Direct materials	$32	$16
Direct labor	24	19
Variable manufacturing overhead	10	9
traceable fixed manufacturing overhead	20	22
variable selling expenses	16	12
common fixed expenses	19	14
total cost per unit	$121	$92

 

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.

1. Assume that Cane expects to produce and sell 94,000 Betas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 5,000 additional Betas for a price of $43 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?

2. Assume that Cane normally produces and sells 44,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?