The cost accountant for Bruin Manufacturing Inc has

prepared the #8061

The cost accountant for Bruin Manufacturing, Inc., has prepared the analysis given below of the
profitability of each of the firm's three products. All fixed costs are allocated costs and are not
related to specific products.Management has been considering several options concerning the
company's product mix to reduce or eliminate the loss on Item 103. The company's president
has asked you to prepare an analysis of the effects on the company's net income before taxes
for each of the following proposals.Consider each proposal independently; no changes would
occur in the other products.PROPOSALS1. Discontinue Item 103.2. Increase the sales price of
Item 103 to $40. Marketing analysis indicates that the increase in price will cause a decrease in
sales of Item 103 to 1,000 units.3. Discontinue Item 103 and use the resulting plant capacity to
produce a new product, Item 104.The department's marketing studies estimate that 1,500 units
could be sold at $35 each. The variable costs and expenses per unit of Item 104 are estimated
to be $11 per unit manufacturing cost and $8 per unit for operating expenses.View Solution:
The cost accountant for Bruin Manufacturing Inc has prepared the

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