Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Profit Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $ 40 37 24 32 by 29 32 $194 Beta $24 30 22 35 25 27 $163 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 5. Assume that Cane normally produces and sells 107,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Profit Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $ 40 37 24 32 by 29 32 $194 Beta $24 30 22 35 25 27 $163 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 5. Assume that Cane normally produces and sells 107,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product
uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000
units of each product. Its unit costs for each product at this level of activity are given below:
Direct materials
Direct labour
Profit
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Cost per unit
Alpha
$40
37
24
32
29
32
$194
by
Beta
$24
30
22
35
25
27
$163
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses
are deemed unavoidable and have been allocated to products based on sales dollars.
6. Assume that Cane normally produces and sells 107,000 Betas per year. If Cane discontinues the Beta product line, how much will
profits increase or decrease?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F020c2c27-f19e-4f36-9f11-a29e11b05e0e%2F12bd7634-013e-4674-b841-d109216bfc67%2Fidr55wg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product
uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000
units of each product. Its unit costs for each product at this level of activity are given below:
Direct materials
Direct labour
Profit
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Cost per unit
Alpha
$40
37
24
32
29
32
$194
by
Beta
$24
30
22
35
25
27
$163
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses
are deemed unavoidable and have been allocated to products based on sales dollars.
6. Assume that Cane normally produces and sells 107,000 Betas per year. If Cane discontinues the Beta product line, how much will
profits increase or decrease?
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