Cane Company manufactures two products called Alpha and Beta that sell for $150 and $105, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 107,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	30			$	10
Direct labour			25				20
Variable manufacturing overhead			12				10
Traceable fixed manufacturing overhead			21				23
Variable selling expenses			17				13
Common fixed expenses			20				15
Cost per unit		$	125			$	91

The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.

5. Assume that Cane expects to produce and sell 100,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 15,000 additional Alphas for a price of $100 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 8,000 units.

a. Calculate the incremental net operating income if the order is accepted

6 Assume that Cane normally produces and sells 95,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

8. Assume that Cane normally produces and sells 65,000 Betas and 85,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 20,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?