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Accounting

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Cane Company manufactures two products called Alpha and Beta that sell for $175 and $135, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 117,000 units of each product. Its average cost per unit for each product at this level of activity are given below:
Alpha Beta
Direct materials $ 40 $ 15
Direct labor 3030
Variable manufacturing overhead 1816
Traceable fixed manufacturing overhead 2629
Variable selling expenses 2319
Common fixed expenses 2621
Total cost per unit $ 163 $ 130
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.
7. Assume that Cane normally produces and sells 51,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

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