Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each
Question:
Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 units of each product. Its average cost per unit for each product at this level of activity are given below: AlphaBetaDirect materials$ 25$ 10Direct labor2221Variable manufacturing overhead177Traceable fixed manufacturing overhead1820Variable selling expenses1410Common fixed expenses1712Total cost per unit$ 113$ 80 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.8. Assume that Cane normally produces and sells 62,000 Betas and 82,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 17,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Introduction to Managerial Accounting
ISBN: 978-0078025792
7th edition
Authors: Peter Brewer, Ray Garrison, Eric Noreen