Cane Company manufactures two products called Alpha and Beta that sell for $150...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Cane Company manufactures two products called Alpha and Beta that sell for $150 and $105, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 107,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha
Beta
Direct materials
$ 30
$ 10
Direct labor
25
20
Variable manufacturing overhead
12
10
Traceable fixed manufacturing overhead
21
23
Variable selling expenses
17
13
Common fixed expenses
20
15
Total cost per unit
$ 125
$ 91
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.
Foundational 11-8 (Algo)
8. Assume that Cane normally produces and sells 65,000 Betas and 85,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 20,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
