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Bradley Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner Sales 300,000 450,000 200,000 Variable expenses 150,000
Bradley Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner Sales 300,000 450,000 200,000 Variable expenses 150,000 200,000 155,000 Contribution margin 150,000 250,000 45,000 Fixed expenses 120.000 230.000 95.000 Net income 30,000 20,000 (50,000) Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $30,000 (Tingler), $80,000 (Shocker), and $35,000 (Stunner). The common costs will be incurred regardless of how many models are produced. The other fixed expenses would be eliminated if a model is phased out. James Waters, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income. Required: 1. Compute current net income for Bradley Company. 2. Compute net income by product line and in total for Bradley 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.) 3. Should Bradley eliminate the Stunner product line? Why or why not
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