Exercise 20-16 Cawley Company makes three models of tasers. Information on the t

Question

Exercise 20-16 Cawley Company makes three models of tasers. Information on the three products is given below Tingler Shocker Stunner $298,600 $497,700 $204,500 Sales Vanable expenses194,500196.30061 Contribution margin 146,100 299,200 67,100 119,933 230,832 96,235 $26,167 $68,368 $(29,135) Fixed expenses Net income Fixed expenses consist of $303,100 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $29,500 (Tingler), $80,100 (Shocker), and $34,300 (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 $303,100 common costs to the two remaining product lines based on their relative sales.) (Round answers to the nearest whole dollar, e.g. 5,275.)

Explanation / Answer

a Net income = 26167+68368-29135= $65400 b Tingler Shocker Total Sales 298600 497700 796300 Variable expenses 152500 198500 351000 Contribution margin 146100 299200 445300 Fixed expenses 143158 269542 412700 Net income 2942 29658 32600 Workings: Fixed expenses: Tingler =29500+(303100/796300*298600) Shocker =80100+(303100/796300*497700)

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