Question

Assume that Cane normally produces and sells 62,000 Betas and 82,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 17,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line

Answer 1

Answer:

Please find the complete question in the attachment.

Explanation:

$\beta$ the margin of contribution unit$= 130-25-22-17-14 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ =52$

$\alpha$ Margin Contribution Unit $= 90-10-21-7-10\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ = 42$

8

Contribution losses $=62000\times 42 \ \ \ \ \ \ \ \ \ \ \ \ = -2604000$

Fixed cost avoidable $=102000\times 20 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ = 2040000$

The margin of Alpha contributions $=17000\times 52 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ =884000$

Fiscal benefits (disadvantage)$= 320000$