Question
Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material
Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 units of each product. Its average cost per unit for each product at this level of activity are given below: AlphaBetaDirect materials$ 25$ 10Direct labor2221Variable manufacturing overhead177Traceable fixed manufacturing overhead1820Variable selling expenses1410Common fixed expenses1712Total cost per unit$ 113$ 80 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 62,000 Betas and 82,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 17,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started