Q.7 Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its unit costs for each product at this level of activity are given below:

For Alpha: Direct materials:$40

Direct labour:38

Variable manufacturing overhead:25

Traceable fixed manufacturing overhead:33

Variable selling expenses:30

Common fixed expenses:33

Cost per unit:$199

For Beta:

Direct materials:$24

Direct labour:34

Variable manufacturing overhead:23

Traceable fixed manufacturing overhead:36

Variable selling expenses:26

Common fixed expenses:28

Cost per unit:$171

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.

Assume that Cane normally produces and sells 108,000 Betas per year. If Cane discontinues the Beta product line, how much wil profits increase or decrease? Profit=? by=?