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 $215 and $160, respectively. Each product uses only one type of raw material

Cane Company manufactures two products called Alpha and Beta that sell for $215 and $160, respectively. Each product uses only one type of raw material that costs $7 per pound. The company has the capacity to annually produce 125,000 units of each product. Its unit costs for each product at this level of activity are given below:

ALPHA BETA

Direct materials

$ 42 $ 21
Direct labor 35 28
Variable manufacturing overhead 23 21
Traceable fixed manufacturing overhead 31 34
Variable selling expenses 28 24
Common fixed expenses 31 26
Total cost per unit $ 190 $ 154

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.

1. Assume that Cane normally produces and sells 76,000 Betas and 96,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 16,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?

Profit ___ Increase/decrease? by ______?

.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

IT Auditing An Adaptive Process

Authors: Robert E. Davis

1st Edition

0557220513, 978-0557220519

More Books

Students also viewed these Accounting questions

Question

b. Why were these values considered important?

Answered: 1 week ago