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Cane Company manufactures two products called Alpha and Beta that sell for $ and $ respectively. Each product
uses only one type of raw materlal that costs $ per pound. The company has the capacity to annually produce
units of each product. Its average cost per unit for each product at this level of activity are given below:
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 Betas and Alphas per year. If Cane discontinues the Beta product
line, its sales representatives could increase sales of Alpha by units. What is the financial advantage disadvantage of
discontinuing the Beta product line?
