Business, 15.04.2020 04:51 ella3714

Cawley Company makes three models of tasers. Information on the three products is given below.

Tingler Shocker Stunner

Sale $296,600 $498,800 $198,400
Variable expenses 150,900 206,400 136,900
Contribution margin 145,700 292,400 61,500
Fixed expenses 121,202 234,190 96,208
Net Income $24,498 $58,210 $(34,708)

Fixed expenses consist of $308,600 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $29,100 (Tingler), $79,300 (Shocker), and $34,600 (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.

Required:
a. Compute current net income for Cawley Company.
b. Compute net income by product line and in total for Cawley Company if the company discontinues the Stunner product line.

Answers: 3

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Cawley Company makes three models of tasers. Information on the three products is given below.
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