The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are
Question:
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.
6. Assume that Cane normally produces and sells 94,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Assume that Cane normally produces and sells 94,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Direct materials | $ | 32 | $ | 16 | ||||
Direct labor | 24 | 19 | ||||||
Variable manufacturing overhead | 10 | 9 | ||||||
Traceable fixed manufacturing overhead | 20 | 22 | ||||||
Variable selling expenses | 16 | 12 | ||||||
Common fixed expenses | 19 | 14 | ||||||
Total cost per unit | $ | 121 | $ | 92 | ||||
Introduction to Managerial Accounting
ISBN: 978-0078025792
7th edition
Authors: Peter Brewer, Ray Garrison, Eric Noreen