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Sales Variable expenses Contribution margin Fixed expenses Net income Net income $ (b) 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 $30,000 (Tingler), $79,200 (Shocker), and $34,600 (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 Crane Company. Tingler Net Income Shocker Net Income Total Net Income Tingler Shocker $298,000 $502,000 147,600 201,100 150,400 300,900 121,188 232,812 $29,212 $68,088 Compute net income by product line and in total for Crane 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.) No Why or why not? $ $ 56,600 $ (c) Should Crane eliminate the Stunner product line? Stunner $200,000 144,900 55,100 95,800 $(40,700) Net income would decrease from $ 56,600 to $

Sales Variable expenses Contribution margin Fixed expenses Net income Net income $ (b) 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 $30,000 (Tingler), $79,200 (Shocker), and $34,600 (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 Crane Company. Tingler Net Income Shocker Net Income Total Net Income Tingler Shocker $298,000 $502,000 147,600 201,100 150,400 300,900 121,188 232,812 $29,212 $68,088 Compute net income by product line and in total for Crane 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.) No Why or why not? $ $ 56,600 $ (c) Should Crane eliminate the Stunner product line? Stunner $200,000 144,900 55,100 95,800 $(40,700) Net income would decrease from $ 56,600 to $

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sales Variable expenses Contribution margin Fixed expenses Net income Net income (b) 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 $30,000 (Tingler), $79,200 (Shocker), and $34,600 (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 Crane Company. Shocker Net Income Tingler Shocker Stunner $298,000 $502,000 $200,000 147,600 201,100 144,900 Tingler Net Income $ Total Net Income 150,400 121,188 $29,212 (c) Compute net income by product line and in total for Crane 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.) No Why or why not? 300,900 232,812 $68,088 $ $ 56,600 Should Crane eliminate the Stunner product line? 55,100 95,800 $(40,700) Net income would decrease from $ 56,600 to $
Transcribed Image Text:Sales Variable expenses Contribution margin Fixed expenses Net income Net income (b) 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 $30,000 (Tingler), $79,200 (Shocker), and $34,600 (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 Crane Company. Shocker Net Income Tingler Shocker Stunner $298,000 $502,000 $200,000 147,600 201,100 144,900 Tingler Net Income $ Total Net Income 150,400 121,188 $29,212 (c) Compute net income by product line and in total for Crane 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.) No Why or why not? 300,900 232,812 $68,088 $ $ 56,600 Should Crane eliminate the Stunner product line? 55,100 95,800 $(40,700) Net income would decrease from $ 56,600 to $
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