1
answer
0
watching
174
views

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 ______?

.

For unlimited access to Homework Help, a Homework+ subscription is required.

Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in

Related questions

Weekly leaderboard

Start filling in the gaps now
Log in