Foundational 13-6 (Algo) 6. Assume that Cane normally produces and sells 97,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Foundational 13-6 (Algo) 6. Assume that Cane normally produces and sells 97,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?
Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs
Section: Chapter Questions
Problem 1EP
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Subject: acounting
![Required information
The Foundational 15 (Algo) [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6]
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115,
respectively. Each product uses only one type of raw material that costs $6 per pound. The
company has the capacity to annually produce 110,000 units of each product. Its average cost
per unit for each product at this level of activity are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Total cost per unit
Alpha
$24
23
22
23
19
22
$ 133
Beta
$ 12
26
12
25
15
17
$ 107
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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F472621be-5969-4a54-b52e-f83201e6e65c%2F48832d6b-c55d-46cf-8479-933f93ce4a87%2Fpk9swl2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
The Foundational 15 (Algo) [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6]
[The following information applies to the questions displayed below.]
Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115,
respectively. Each product uses only one type of raw material that costs $6 per pound. The
company has the capacity to annually produce 110,000 units of each product. Its average cost
per unit for each product at this level of activity are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Traceable fixed manufacturing overhead
Variable selling expenses
Common fixed expenses
Total cost per unit
Alpha
$24
23
22
23
19
22
$ 133
Beta
$ 12
26
12
25
15
17
$ 107
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.
Transcribed Image Text:Foundational 13-6 (Algo)
6. Assume that Cane normally produces and sells 97,000 Betas per year. What is the financial advantage
(disadvantage) of discontinuing the Beta product line?
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