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 $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject: acounting
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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