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Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product uses only one type of raw material

Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 110,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

Alpha Beta Direct materials$ 24$ 12

Direct labor 2326

Variable manufacturing overhead2212

Traceable fixed manufacturing overhead2325

Variable selling expenses1915

Common fixed expenses2217

Total cost per unit$ 133$ 107

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.

8 Assume that Cane normally produces and sells 67,000 Betas and 87,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

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