The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6] [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $180 and $145, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha Beta $ 36 $ 24 32 27 19 17 27 30 24 20 27 22 $ 165 $ 140 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. Foundational 11-8 (Algo) 8. Assume that Cane normally produces and sells 72,000 Betas and 92,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 12,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6] [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $180 and $145, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha Beta $ 36 $ 24 32 27 19 17 27 30 24 20 27 22 $ 165 $ 140 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. Foundational 11-8 (Algo) 8. Assume that Cane normally produces and sells 72,000 Betas and 92,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 12,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6]
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $180 and $145, respectively. Each product
uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Total cost per unit
Alpha
Beta
$ 36
$ 24
32
27
19
17
27
30
24
20
27
22
$ 165
$ 140
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.
Foundational 11-8 (Algo)
8. Assume that Cane normally produces and sells 72,000 Betas and 92,000 Alphas per year. If Cane discontinues the Beta product
line, its sales representatives could increase sales of Alpha by 12,000 units. What is the financial advantage (disadvantage) of
discontinuing the Beta product line?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F869877c1-4b8d-4243-b605-e1e67e7b2176%2Fd7db53c0-8361-4109-8228-f25c2c318134%2F6rm58mi_processed.png&w=3840&q=75)
Transcribed Image Text:The Foundational 15 (Algo) [LO11-2, LO11-3, LO11-4, LO11-5, LO11-6]
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $180 and $145, respectively. Each product
uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000
units of each product. Its average cost per unit for each product at this level of activity are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Total cost per unit
Alpha
Beta
$ 36
$ 24
32
27
19
17
27
30
24
20
27
22
$ 165
$ 140
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.
Foundational 11-8 (Algo)
8. Assume that Cane normally produces and sells 72,000 Betas and 92,000 Alphas per year. If Cane discontinues the Beta product
line, its sales representatives could increase sales of Alpha by 12,000 units. What is the financial advantage (disadvantage) of
discontinuing the Beta product line?
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