Chec × Ashley Cezto.mheducation.com/hm.tpx?-=0.3967218686745263-1 5 1 1 97806436
ID: 2583111 • Letter: C
Question
Chec × Ashley Cezto.mheducation.com/hm.tpx?-=0.3967218686745263-1 5 1 1 978064366 Required information 1.00 points 7. Assume that Cane normally produces and sells 40,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? by Required Informati orn [The following information appWes to the questions displayed below Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its unit costs for each product at this level of activity are given below: References eBook & Resources Learning Objective: 12-03 Prepare a make or buy analysis Worksheet Alpha $ 30 20 Beta $ 12 15 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Difficulty: 2 Mediunm Learning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted. 16 12 15 18 Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped. Learning Objective: 12-05 Determine the most profitable use of a constrained 10 Total cost per unit $100 $ 68Explanation / Answer
Per unit 40000 units Revenue 80 3200000 Expenses: Direct materials 12 480000 Direct labor 15 600000 Variable manufacturing overhead 5 200000 Variable selling expenses 8 320000 Total variable expenses 40 1600000 Loss in contribution margin -1600000 Avoidable fixed costs 1800000 Change in profit 200000 Profit increases by $200000