Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 unit costs 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 deemed unavoidable and have been allocated to products based on sales dollars.

Required:

Assume that Cane normally produces and sells 60,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? (Input the amount as positive value.)

profit ____(DecresDecreasecrease)______ by $___________

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions