Question

Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. Its average cost per unit for each product at this level of activity are given below Alpha Il Beta s 24 32 24 37 27 29 $ 42 42 26 34 31 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expensen $209 Total cost per unit 9309$273 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses pre unavoldable artd have been allocated to products based on sales dollars. 6. Assume that Cane normally produces and sells 109,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line? Financial (disadvantage)

Answer 1