Assume that Cane normally produces and sells 46,000 Betas per year. What is the financial...
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Assume that Cane normally produces and sells 46,000 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 $150 and $110, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 108,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta $ 15 $ 30 26 13 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses 18 21 $130 24 14 16 $102 Total cost per unit 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
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Assume that Cane normally produces and sells 46,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?