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Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material

Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

Alpha Beta
Direct materials $ 35 $ 15
Direct labor 48 23
Variable manufacturing overhead 27 25
Traceable fixed manufacturing overhead 35 38
Variable selling expenses 32 28
Common fixed expenses 35 30
Total cost per unit $ 212 $ 159

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 80,000 Betas and 100,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 13,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

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