1 Function: SUM; Formula: Add, Divide, Subtract, Multiply; Cell Referencing 2 3 Using Excel For Incremental Analysis for Elimination of a Product Line Student Work Area Required: Provide input into cells shaded in yellow in this template. Use mathematical formulas with cell references to the Problem or work area as indicated. Use the SUM function with cell references to add amounts as indicated. a. Compute current net income for Cawley Company. Current net income $ 60,000 b. Compute net income by product line and in total for Cawley Company if the company discontinues the Stunner product line. (Hint: Allocate the $300,000 common costs to the two remaining product lines based on their relative sales.) 5 PROBLEM 6 Cawley Company makes three models of tasers. Information on the three products is 7 viven below. 8 9 Tingler Shocker Stunner 10 Sales $ 300,000 $ 500,000 $ 200,000 11 Variable expenses 150,000 200,000 145,000 12 Contribution margin 150,000 300,000 55,000 13 Fixed expenses 120,000 230,000 95,000 Net income 30,000 $ 70,000 $ (40,000) 15 16 Fixed expenses consist of common costs allocated to the three products based on 17 relative sales, as well as direct fixed expenses unique to cach model. The common costs 18 will be incurred regardless of how many models are produced. The direct fixed expenses 13 would be eliminated if that model is phased out. These fixed expenses are presented 20 21 22 Allocated fixed common costs $ 300,000 23 Direct fixed expenses! 24 Tingler 30,000 25 Shocker 80,000 Stunner 35,000 27 28 James Watt, an executive with the company, feels the Stunner line should be 29 discontinued to increase the company's net income. 30 31 32 Shocker Common cost allocation Tingler $ 1,000,000 Total $ Sales Variable expenses Contribution margin Fixed expenses Net income Tingler 300,000 150,000 150.000 Shocker $ 500.000 200.0XXO 300.000 26 c. Should Cawley eliminate the Stunner product line? Why or why not? Cawley the Stunner product line because eliminating will cause An elimination would result in of contribution 34 35 36 37 38 39 margin of with a of fixed expenses