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Cane Company manufactures two products called Alpha and Beta that sell for $195 and $150, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 123,000 units of each product. Its unit costs for each product at this level of activity are given below:

	Alpha				Beta
Direct materials		$	40			$	15
Direct labor			34				28
Variable manufacturing overhead			22				20
Traceable fixed manufacturing overhead			30				33
Variable selling expenses			27				23
Common fixed expenses			30				25
Total cost per unit		$	183			$	144

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 110,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 25,000 additional Alphas for a price of $140 per unit. If Cane accepts the customers offer, it will decrease Alpha sales to regular customers by 12,000 units.

a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be indicated with a minus sign.)

6. Assume that Cane normally produces and sells 105,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

7. Assume that Cane normally produces and sells 55,000 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 75,000 Betas and 95,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 15,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?