Exercise 20-16 Cawley Company makes three models of tasers. Information on the t
ID: 2555056 • Letter: E
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
Answer a
Net Income for Cawley Company : $65,400
Answer b
Note 1 : Allocation of Common Fixed cost
Tingler Net Profit : $2,942
Shocker Net Profit : $29,658
Total Net Income : $32,600
Particulars Tingler ($) Shocker ($) Stunner ($) Total ($) Sales 298,600 497,700 204,500 1000,800 Variable expenses 152,500 198,500 137,400 488,400 Contribution margin 146,100 299,200 67,100 512,400 Fixed expenses 119,933 230,832 96,235 447,000 Net income $26,167 $68,368 $(29,135) $65,400Related Questions
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