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Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 117,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	40			$	15
Direct labor			30				30
Variable manufacturing overhead			18				16
Traceable fixed manufacturing overhead			26				29
Variable selling expenses			23				19
Common fixed expenses			26				21
Total cost per unit		$	163			$	130

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.

Required:

1.Assume that Cane expects to produce and sell 106,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 21,000 additional Alphas for a price of $124 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 10,000 units.

a. What is the financial advantage (disadvantage) of accepting the new customers order?

b. Based on your calculations above should the special order be accepted?

2. Assume that Cane normally produces and sells 101,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

3. Assume that Cane normally produces and sells 51,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

4. Assume that Cane normally produces and sells 71,000 Betas and 91,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?