Question

Cawley Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income Tingler Shocker Stunner $302.000 $498,000 $200,000 150,900 193,100 137,700 151.100 304.900 62,300 121.412 232,988 96.200 $29,688 571,912 S[33.900) Fixed expenses consist of $306,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29.000 (Tingler). $80,600 Shocker), and $35,000 Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that 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 $ (b) Compute net income by product line and in total for Cawley Company if the company discontinues the Stunner product line. (Hint: Allocate the $306,000 common costs to the two remaining product lines based on their relative sales) Tingler Net Income $ Shocker Net Income $ Total Net Income 5 Should Cawley eliminate the Stunner product line? Why or why not? Net income would from 5 to $

Part B & C please

Answer 1

Sales Varaibles Expense contribution Margin Fixed Expense Net operating Margin DATA Tingler Shocker Stunner Total 302000 498000 200000 1000000 150900 193100 137700 481700 151100 304900 62300 518300 121412 232988 96200 450600 296887 1912 -33900 67700 306000 IF Sutnner is Discontinued Allocation of Common Fixed Cost of Tingler Shocker Total Sales Allocation Base) 302000 498000 Allocatoin ratio =(division sales \/Total Sales ) 0.3775 0.6225 Allocation 115515 190485 800000 306000

Calculation of Net Income of Each division & company Tingler Shocker Total Sales 302000| 498000 800000 Varaibles Expense 150900 193100 344000 contribution Margin 151100 304900 456000 Common Fixed Expense 115515 190485 306000 Additional fixed Cost 29000 80600 109600 Total Fixed Cost 144515 271085 415600 Net income 6585 33815 Answers a) Comupute Current Net income for Cawley Company Net income 67700 B) Net Income Tingler Net Income 6585 Shocker Net income 33815 Total Net Income 40400 C) Should Cawley eliminate the Stunner Product Line ? NO Why or Why Not Net Income Would Reduce(or) Decrease From $67700 To $40400