Cawley Company makes three models of tasers. Information on the three products i

Question

Cawley Company makes three models of tasers. Information on the three products is given below. $300,000 $500,000 $200,000 155,000 190,00o 135,000 margin 145,000 310,000 65,000 93,000 $18,000 $85,000 s(28,000) Fioxed expenses Net income 127,000 225,000 Foxed expenses consist of $290,000 of common costs allocated to the three common costs will be incurred regardless of how many models are based on relative sales, and adcitional fxed expenses of $43,000 (Tingler), $80.000 (Shockerh, and $35,003 (tuoner). The The other fioxed expenses would be elirminated if a model is phased out. ames watt, an executive with the company, feels the Stunner line should b·discontinued to increase the company's net income. Net income ine and in total for Cewley Company f the company discontinues the Stunner product line. (hint: Allocate the $290,000 common costs to the two remaning preduct lines based on their relative sales.) (Round intermodate calculations to 4 decimal places, eg. 15.2575 and finlaswers to the nearest whole dollar, 45 Shocker Net income

Explanation / Answer

(a) Computation of Current Net Income:

(b)

Cawley Company Sales $1,000,000 Variable expenses $480,000 Contribution Margin $520,000 Fixed Expenses: Common Cost $290,000 Tingler $40,000 Shocker $80,000 Stunner $35,000 $445,000 Net Income $75,000

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