Cullumber Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner $296,000 $504,000 $200,000 150,300 196,800 136,900 145,700 307,200 63,100 121,168 234,632 95,900 $24.532 $72,568 $(32,800) Sales Variable expenses Contribution margin Fixed expenses Net income Fixed expenses consist of $308,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $30,000 (Tingler), $79,400 (Shocker), and $34,300 (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. (a) Compute current net income for Cullumber Company. Net income $ (b) Compute net income by product line and in total for Cullumber Company if the company discontinues the Stunner product line. (Hint: Allocate the $308,000 common costs to the two remaining product lines based on their relative sales.) Tingler Net Income $ Shocker Net Income $ Total Net Income No 64300 59 Why or why not? Should Cullumber eliminate the Stunner product line? 33760 Net income would decrease from $ 64300 to $
Cullumber Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner $296,000 $504,000 $200,000 150,300 196,800 136,900 145,700 307,200 63,100 121,168 234,632 95,900 $24.532 $72,568 $(32,800) Sales Variable expenses Contribution margin Fixed expenses Net income Fixed expenses consist of $308,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $30,000 (Tingler), $79,400 (Shocker), and $34,300 (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. (a) Compute current net income for Cullumber Company. Net income $ (b) Compute net income by product line and in total for Cullumber Company if the company discontinues the Stunner product line. (Hint: Allocate the $308,000 common costs to the two remaining product lines based on their relative sales.) Tingler Net Income $ Shocker Net Income $ Total Net Income No 64300 59 Why or why not? Should Cullumber eliminate the Stunner product line? 33760 Net income would decrease from $ 64300 to $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A-6
Transcribed Image Text:Cullumber Company makes three models of tasers. Information on the three products is given below.
Tingler Shocker
Stunner
$296,000 $504,000 $200,000
150,300
136,900
145,700
63,100
Sales
Variable expenses
Contribution margin
Fixed expenses
Net income
Net income
Tingler Net Income
Total Net Income
Fixed expenses consist of $308,000 of common costs allocated to the three products based on relative sales, as well as direct fixed
expenses unique to each model of $30,000 (Tingler), $79,400 (Shocker), and $34,300 (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.
(a)
Compute current net income for Cullumber Company.
(c)
121,168
69
Shocker Net Income $
No
$24.532
(b)
Compute net income by product line and in total for Cullumber Company if the company discontinues the Stunner product line. (Hint:
Allocate the $308,000 common costs to the two remaining product lines based on their relative sales.)
Why or why not?
$
69
196,800
$
307.200
234,632
$72,568
64300
Should Cullumber eliminate the Stunner product line?
95,900
33760
Net income would decrease ✓ from $
$(32,800)
64300 to $
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