Question

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 $29,000 (Tingler), $79,400 (Shocker), and $34,700 (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.

Answer 1

Net income for Cawley Company is $65,300.

Step-by-step explanation:

Stunner and Shocker income will be proportionate to Cawley company since these production lines produce net income more than the minimum threshold. Tingler production line has net income less than minimum threshold and the company may think of shutting this production line.