(b)Compute net income by product line and in total for Blossom Company if the company discontinues the Stunner product line. (Hint:Allocate the $290,000 common costs to the two remaining product lines based on their relative sales.)Tingler Net IncomeShocker Net IncomeTotal Net Income(c)Why or why not?$Should Blossom eliminate the Stunner product line?Net income would$from $to $ Blossom Company makes three models of tasers. Information on the three products is given below.SalesVariable expensesContribution marginFixed expensesNet income(a)TinglerShockerStunner$296,000 $504,000 $200,000145.000 190,000151,000 314,000114,840225,160$36,160 $88,840Net incomeFixed expenses consist of $290,000 of common costs allocated to the three products based on relative sales, as well as direct fixedexpenses unique to each model of $29,000 (Tingler). $79.000 (Shocker), and $34,000 (Stunner). The common costs will be incurredregardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out.James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income.Compute current net income for Blossom Company.135,00065,00092,000$(27,000)

Net Income refers to the amount an individual or business makes after deducting costs, allowances…

Blossom Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income Shocker Tingler $296,000 $504,000 145,000 190,000 151,000 314,000 114,840 225,160 $36,160 $88,840 Stunner $200,000 135,000 65,000 92,000 $(27,000) Fixed expenses consist of $290,000 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), $79,000 (Shocker), and $34,000 (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.

Blossom Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income Shocker Tingler $296,000 $504,000 145,000 190,000 151,000 314,000 114,840 225,160 $36,160 $88,840 Stunner $200,000 135,000 65,000 92,000 $(27,000) Fixed expenses consist of $290,000 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), $79,000 (Shocker), and $34,000 (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.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 16E

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