Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity is 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 $ 32 $ 16 24 19 10 9 20 22 16 12 19 14 $ 121 $ 92 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume Cane normally produces and sells 44,000 Betas per year. What is the financial dvantage (disadvantage) of discontinuing the Beta product line?
Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity is 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 $ 32 $ 16 24 19 10 9 20 22 16 12 19 14 $ 121 $ 92 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume Cane normally produces and sells 44,000 Betas per year. What is the financial dvantage (disadvantage) of discontinuing the Beta product line?
Chapter5: Process Costing
Section: Chapter Questions
Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
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Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity is given below:
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