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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

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 $_____ .

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