Cane Company manufactures two products called Alpha and Beta that sell for $ 2 1 0 and $ 1 7 2 , respectively. Each product uses only one type of raw material that costs $ 8 per pound. The company has the capacity to annually produce 1 2 8 , 0 0 0 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 4 0 $ 2 4 Direct labor 3 8 3 4 Variable manufacturing overhead 2 5 2 3 Traceable fixed manufacturing overhead 3 3 3 6 Variable selling expenses 3 0 2 6 Common fixed expenses 3 3 2 8 Total cost per unit $ 1 9 9 $ 1 7 1 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 5 8 , 0 0 0 Betas per year. What is the financial advantage ( disadvantage ) of discontinuing the Beta product line?
Cane Company manufactures two products called Alpha and Beta that sell for $ 2 1 0 and $ 1 7 2 , respectively. Each product uses only one type of raw material that costs $ 8 per pound. The company has the capacity to annually produce 1 2 8 , 0 0 0 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 4 0 $ 2 4 Direct labor 3 8 3 4 Variable manufacturing overhead 2 5 2 3 Traceable fixed manufacturing overhead 3 3 3 6 Variable selling expenses 3 0 2 6 Common fixed expenses 3 3 2 8 Total cost per unit $ 1 9 9 $ 1 7 1 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 5 8 , 0 0 0 Betas per year. What is the financial advantage ( disadvantage ) of discontinuing the Beta product line?
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