applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha $ 30 Beta Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses $ 12 20 15 15 16 18 12 15 10 Total cost per unit $ 100 $ 68 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. 3. Assume that Cane normally produces and sells 60,000 Betas and 80,000 Alphas per year. If Cane discontinues the Beta product ine, its sales representatives could increase sales of Alpha by 15,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha $ 30 Beta Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses $ 12 20 15 15 16 18 12 15 10 Total cost per unit $ 100 $ 68 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. 3. Assume that Cane normally produces and sells 60,000 Betas and 80,000 Alphas per year. If Cane discontinues the Beta product ine, its sales representatives could increase sales of Alpha by 15,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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