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:

Direct materials $ 24 $ 12

Direct labor 23 26

Variable manufacturing overhead 22 12

Traceable fixed manufacturing overhead 23 25

Variable selling expenses 19 15

Common fixed expenses 22 17

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.

6 Assume that Cane normally produces and sells 97,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

7. Assume that Cane normally produces and sells 47,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?