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Chrome File Edit View History Bookmarks People Window Help 8896 Sat 9:06 PM / [y] WileyPLUS ? -> C Secure https://edugenwileyplus.com/edugen/student/mainfr.uni WileyPLUS: MyWlleyPLUSI HelRI Contact UsI Log Out WileyPLUS Weygandt, Financial & Managerial Accounting, 2e Financial and Managerial Accounting (ACCTG 10 and 11) MESSAGE MY INSTRUCTOR STANDARD VIEW PRINTER VERSION BACK Exercise 21-16 Cawley Company makes three models of tasers. Information on the three products is given below Sales Variable expenses Contribution margin Fixed expenses Net income Tingler Shocker Stunner $300,000 $500,000 $200,000 165,000 190,000 135,000 65,000 93,000 $18,000 $85,000 $(28,000) 135,000 117,000 225,000 310,000 Fixed expenses consist of $290,000 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $30,000 (Tingler), $80,000 (Shocker), and $35,000 (Stunner). The common costs will be incurred regardless of how many models are produced. The other fixed expenses would be eliminated if a model is phased out. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income Compute current net income for Cawley Company Net income s Compute net income by product line and in total for Cawley Company if the company discontinues the Stunner product line. (Hint: Allocate the $290,000 common costs to the two remaining product lines based on their relative sales.) (Round intermediate calculations to 4 decimal places, e.g. 15.2575 and final answers to the nearest whole dollar, e.g. 5,275.) Tingler Net Income Shocker Net Income Total Net Income $ LINK TO TEXT VIDEO: SIMILAR EXERCISE

Explanation / Answer

Common fixed costs allocated in proportionate to Sales

Tingler = 290,000/800,000*300,000 = $108,750

Shocker = 290,000/800,000*500,000 = $181,250  

Requirement a Current Net income for Cawley Company Tingler Shocker Stunner Net income            18,000            85,000 -28,000 Current net Income            75,000 Requirement b Net Income if company discontinues the stunner product line Tingler Shocker Total Contribution margin        1,35,000         3,10,000 Fixed Expenes Specific Fixed Expenses            30,000            80,000 Common Fixed costs        1,08,750         1,81,250 Net Income             -3,750            48,750    45,000

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