Question

Cawley Company makes three models of tasers. Information on the three products is given below.

Tingler Shocker Stunner
Sales $296,000 $504,000 $200,000
Variable expenses 150,300 196,800 136,900
Contribution margin 145,700 307,200 63,100
Fixed expenses 121,168 234,632 95,900
Net income $24,532 $72,568 $(32,800)
Fixed expenses consist of $308,000 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), $79,400 (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.
Compute current net income for Cawley Company.
Net income $

Answer 1

Current net income for Cawley Company = $64,300

Step-by-step explanation:

The following income are given in the question:

Net income of Tingler = $24,532

Net income of Shocker = $72,568

Net income of Stunner = (-$32,800), or -$32,800

Therefore, the current net income for Cawley Company can be calculated as follows:

Current net income for Cawley Company = Net income of Tingler + Net income of Shocker + Net income of Stunner = $24,532 + $72,568 + (-$32,800) = $24,532 + $72,568 - $32,800 = $64,300