Question

Compute net income by product line and in total for Safe and Secure, Inc., if the company discontinues the Burglar Beware product line. (Hint: Allocate the $448,800 common costs to the two remaining product lines based on their relative sales.) (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)

Answer 1

I could not find the exact question with a fixed cost of $448,800 so I used a similar one. You can use this to figure that one out.

Burglar Beware is discontinued so;

Assurance + Decoder = Safe and Secure

Sales 442,500 737,500 1,180,000

Variable Expenses (221,250) (295,500) (516,750)

Contribution Margin 221,250 442,000 663,250

Fixed Expenses (170,325) (283,875) (454,200)

Additional Fixed cost (45,400) (119,900) (165,300)

Net Income 5,525 38,225 43,750

Fixed cost for Assurance = (Sales / Total Sales) * Fixed expenses

= (442,500 / 1,180,000) * 454,200

= $170,325

Fixed cost for Decoder

= 737,500/1,180,000 * 454,200

= $283,875