Answer:
Particulars Tingler Shocker Stunner Total
Sales $304,000.00 $496,000.00 $200,000.00 $1,000,000.00
Variable expense $149,800.00 $193,300.00 $139,400.00 $482,500.00
Contribution Margin (Sales - Variable
expenses) $154,200.00 $302,700.00 $60,600.00 $517,500.00
Fixed expenses $119,984.00 $226,816.00 $93,200.00 $440,000.00
Net Income (Contribution Margin - Fixed
expenses) $34,216.00 $75,884.00 -$32,600.00 $77,500.00
Computation of net income by product line and in total for Cawley Company if the company discontinues the Stunner product line
Particulars Tingler Shocker Total
Sales $304,000.00 $496,000.00 $800,000.00
Variable expense $149,800.00 $193,300.00 $343,100.00
Contribution Margin
(Sales - Variable expenses) $154,200.00 $302,700.00 $456,900.00
Fixed expenses:
Common Fixed expenses
(296000*304000/800000)
(296000*496000/800000) $112,480.00 $183,520.00 $296,000.00
Direct fixed expenses $30,000.00 $80,000.00 $110,000.00
Total Fixed expenses $142,480.00 $263,520.00 $406,000.00
Net Income (Contribution Margin
- Fixed expenses) $11,720.00 $39,180.00 $50,900.00
Tingler Net Income $11,720.00
Shocker Net Income $39,180.00
Total Net Income $50,900.00
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Should Cawley eliminate the stunner produc tline?
NO
Net income would decrease from $ 77,500 to $ 50900
Explanation:
