Chec × Ashley Cezto.mheducation.com/hm.tpx?-=0.3967218686745263-1 5 1 1 97806436
ID: 2583153 • Letter: C
Question
Chec × Ashley Cezto.mheducation.com/hm.tpx?-=0.3967218686745263-1 5 1 1 978064366 8 Required information 1.00 points 8. Assume that Cane normally produces and sells 60,000 Betas and 80,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 15,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease? 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 Alpha $ 30 20 Worksheet Learning Objective: 12-03 Prepare a make or buy analysis. Beta $ 12 15 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Difficulty: 2 Medium 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 60000 units Revenue 80 4800000 Expenses: Direct materials 12 720000 Direct labor 15 900000 Variable manufacturing overhead 5 300000 Variable selling expenses 8 480000 Total variable expenses 40 2400000 Loss in contribution margin -2400000 Contribution margin from Alpha 765000 =15000*(120-30-20-7-12) Avoidable fixed costs 1800000 Change in profit 165000 Profit increases by $165000