Cane Company manufactures two products called Alpha and Betathat sell for $215 and $160, respectively. Each product uses onlyone type of raw material that costs $7 per pound. The company hasthe capacity to annually produce 125,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
Alpha Beta
Directmaterials $ 42 $ 21 Direct labor 35 28 Variable manufacturing overhead 23 21 Traceable fixed manufacturing overhead 31 34 Variable selling expenses 28 24 Common fixed expenses 31 26 Total cost per unit $ 190 $ 154
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.
1.Assume that Cane normally produces and sells 106,000 Betas peryear. If Cane discontinues the Beta product line, how much willprofits increase or decrease?
Increase/Decrease______? by _________$?
2.Assume that Cane normally produces and sells 56,000 Betas peryear. If Cane discontinues the Beta product line, how much willprofits increase or decrease?
Profit Increase/decrease_______? by_________$?
Cane Company manufactures two products called Alpha and Betathat sell for $215 and $160, respectively. Each product uses onlyone type of raw material that costs $7 per pound. The company hasthe capacity to annually produce 125,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
Alpha Beta
| Directmaterials | $ | 42 | $ | 21 | ||||
| Direct labor | 35 | 28 | ||||||
| Variable manufacturing overhead | 23 | 21 | ||||||
| Traceable fixed manufacturing overhead | 31 | 34 | ||||||
| Variable selling expenses | 28 | 24 | ||||||
| Common fixed expenses | 31 | 26 | ||||||
| Total cost per unit | $ | 190 | $ | 154 | ||||
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.
1.Assume that Cane normally produces and sells 106,000 Betas peryear. If Cane discontinues the Beta product line, how much willprofits increase or decrease?
Increase/Decrease______? by _________$?
2.Assume that Cane normally produces and sells 56,000 Betas peryear. If Cane discontinues the Beta product line, how much willprofits increase or decrease?
Profit Increase/decrease_______? by_________$?
Related questions
Cane Company manufactures two products called Alpha and Betathat sell for $215 and $160, respectively. Each product uses onlyone type of raw material that costs $7 per pound. The company hasthe capacity to annually produce 125,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
ALPHA BETA
Direct materials | $ | 42 | $ | 21 | ||||
| Direct labor | 35 | 28 | ||||||
| Variable manufacturing overhead | 23 | 21 | ||||||
| Traceable fixed manufacturing overhead | 31 | 34 | ||||||
| Variable selling expenses | 28 | 24 | ||||||
| Common fixed expenses | 31 | 26 | ||||||
| Total cost per unit | $ | 190 | $ | 154 |
The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars.
1. Assume that Cane normally produces and sells 76,000 Betas and96,000 Alphas per year. If Cane discontinues the Beta product line,its sales representatives could increase sales of Alpha by 16,000units. If Cane discontinues the Beta product line, how much wouldprofits increase or decrease?
Profit ___ Increase/decrease? by ______?
.
Cane Company manufactures two products called Alpha and Betathat sell for $120 and $80, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 100,000 units of each product. Itsunit costs for each product at this level of activity are givenbelow:
| Alpha | Beta | |||||||
| Direct materials | $ | 30 | $ | 12 | ||||
| Direct labor | 20 | 15 | ||||||
| Variable manufacturing overhead | 7 | 5 | ||||||
| Traceable fixed manufacturing overhead | 16 | 18 | ||||||
| Variable selling expenses | 12 | 8 | ||||||
| Common fixed expenses | 15 | 10 | ||||||
| Total cost per unit | $ | 100 | $ | 68 | ||||
| The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are deemedunavoidable and have been allocated to products based on salesdollars. 1. Assume that Cane expects to produce and sell 90,000 Betasduring the current year. One of Cane |
