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Cawley Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contri

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Answer #1
a.) The current net income for Cawley Company is:
Tingler Shocker Stunner Total
Sales $298,000 $502,000 $200,000 $1,000,000
Variable expenses      1,45,000      1,98,600     1,38,500      4,82,100
Contribution margin      1,53,000      3,03,400        61,500      5,17,900
Fixed expenses      1,20,784      2,35,016        96,100      4,51,900
Net income $32,216 $68,384 $(34,600) $66,000
Net Income $ 66,000
b.) Net Income if the company discontinues Stunner will be:
Tingler Shocker Stunner Total
Sales $298,000 $502,000               -   $8,00,000
Variable expenses      1,45,000      1,98,600               -        3,43,600
Contribution margin      1,53,000      3,03,400               -        4,56,400
Additional Fixed expenses         29,000         80,400               -        1,09,400
Product Margin $124,000 $223,000 $347,000
Common Fixed Expenses      3,08,000
Net Income $39,000
c.) The company should not eliminate the Stunner product line due to reduction in the net income.
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