Required information (The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 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 22 29 Variable manufacturing overhead 20 13 Traceable fixed manufacturing overhead 24 26 Variable selling expenses 20 16 Common fixed expenses 23 18 Total cost per unit $ 139 $ 112 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 48,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

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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 $185 and $120, respectively. Each product
uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000
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
22
29
Variable manufacturing overhead
20
13
Traceable fixed manufacturing overhead
24
26
Variable selling expenses
20
16
Common fixed expenses
23
18
Total cost per unit
$ 139
$ 112
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 48,000 Betas per year. What is the financial advantage (disadvantage) of
discontinuing the Beta product line?
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 $185 and $120, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 112,000 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 22 29 Variable manufacturing overhead 20 13 Traceable fixed manufacturing overhead 24 26 Variable selling expenses 20 16 Common fixed expenses 23 18 Total cost per unit $ 139 $ 112 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 48,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
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