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 productuses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 118,000units of each product. Its average cost per unit for each product at this level of activity are given below:Direct materialsDirect laborVariable manufacturing overheadTraceable fixed manufacturing overheadVariable selling expensesCommon fixed expensesTotal cost per unitAlphaBeta$ 36$ 2432271917273024202722$ 165$ 140The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expensesare 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 productline, its sales representatives could increase sales of Alpha by 12,000 units. What is the financial advantage (disadvantage) ofdiscontinuing the Beta product line?

1. Current Situation:Beta:Revenue: 72,000 units * $145/unit = $10,440,000Total Cost: 72,000 units *…

Answered: The Foundational 15 (Algo) [LO11-2,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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