Cullumber Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income (a) Net income (b) $ Tingler Net Income $ Shocker Net Income Tingler Shocker $300,000 $500,000 Total Net Income (c) Compute current net income for Cullumber Company. Why or why not? 151,400 Net income would 148,600 Fixed expenses consist of $298,000 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), $80,800 (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. $ 119,400 $ $29,200 197,000 303,000 229,800 $73,200 Compute net income by product line and in total for Cullumber Company if the company discontinues the Stunner product line. (Hint: Allocate the $298,000 common costs to the two remaining product lines based on their relative sales.) Should Cullumber eliminate the Stunner product line? Stunner $200,000 V from $ 141,800 58,200 93,900 $(35,700) to S
Cullumber Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income (a) Net income (b) $ Tingler Net Income $ Shocker Net Income Tingler Shocker $300,000 $500,000 Total Net Income (c) Compute current net income for Cullumber Company. Why or why not? 151,400 Net income would 148,600 Fixed expenses consist of $298,000 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), $80,800 (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. $ 119,400 $ $29,200 197,000 303,000 229,800 $73,200 Compute net income by product line and in total for Cullumber Company if the company discontinues the Stunner product line. (Hint: Allocate the $298,000 common costs to the two remaining product lines based on their relative sales.) Should Cullumber eliminate the Stunner product line? Stunner $200,000 V from $ 141,800 58,200 93,900 $(35,700) to S
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A-1
Transcribed Image Text:Cullumber Company makes three models of tasers. Information on the three products is given below.
Sales
Variable expenses
Contribution margin
Fixed expenses
Net income
(a)
Net income $
(b)
Shocker Net Income
Tingler
$300,000 $500,000
Tingler Net Income $
Total Net Income
(c)
Why or why not?
Compute current net income for Cullumber Company.
ta
Net income would
151,400
148,600
$
119,400
S
$29,200
Fixed expenses consist of $298,000 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), $80,800 (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.
Shocker
197,000
303,000
229,800
$73,200
Compute net income by product line and in total for Cullumber Company if the company discontinues the Stunner product line. (Hint
Allocate the $298,000 common costs to the two remaining product lines based on their relative sales.)
Should Cullumber eliminate the Stunner product line?
Stunner
$200,000
from $
141,800
58,200
93,900
$(35,700)
to S
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