Cane Company manufactures two products called Alpha and Beta that sell for $195 and $150, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 123,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

AlphaBetaDirect materials$40$15Direct labor3428Variable manufacturing overhead2220Traceable fixed manufacturing overhead3033Variable selling expenses2723Common fixed expenses3025Total cost per unit$183$144

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 105,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

7. Assume that Cane normally produces and sells 55,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

8. Assume that Cane normally produces and sells 75,000 Betas and 95,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 15,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

9. Assume that Cane expects to produce and sell 95,000 Alphas during the current year. A supplier has offered to manufacture and deliver 95,000 Alphas to Cane for a price of $140 per unit. What is the financial advantage (disadvantage) of buying 95,000 units from the supplier instead of making those units?

10. Assume that Cane expects to produce and sell 70,000 Alphas during the current year. A supplier has offered to manufacture and deliver 70,000 Alphas to Cane for a price of $140 per unit. What is the financial advantage (disadvantage) of buying 70,000 units from the supplier instead of making those units?