1)Sheridan Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows:

	Wood		Aluminum		Hard Rubber		Total
Sales	$440000		$140000		$65000		$645000
Variable expenses	295000		80000		58000		433000
Contribution margin	145000		60000		7000		212000
Fixed expenses	75000		35000		22000		132000
Net income (loss)	$70000		$ 25000		$(15000)		$80000

Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?

$73000

$135000

$95000

$80000

2)Cullumber Company makes three models of tasers. Information on the three products is given below.

		Tingler		Shocker		Stunner
Sales		$300,000		$500,000		$200,000
Variable expenses		151,400		197,000		141,800
Contribution margin		148,600		303,000		58,200
Fixed expenses		119,400		229,800		93,900
Net income		$29,200		$73,200		$(35,700)

Fixed expenses consist of $298,000 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), $80,800 (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 companys net income. (a) Compute current net income for Cullumber Company.

Net income

$ _______

Compute net income by product line and in total for Cullumber Company if the company discontinues the Stunner product line. (Hint: Allocate the $298,000 common costs to the two remaining product lines based on their relative sales.)

Tingler Net Income		$________
Shocker Net Income		$________
Total Net Income		$ ________

Net income would decrease from $____ to $_____ .