Cawley Company makes three models of tasers. Information on the three products is given below.

Tingler Shocker Stunner

Sales $$306,000$ $$494,000$ $$200,000$

Variable expenses $151,000207,800138,000$

Contribution margin $155,000286,20062,000$

Fixed expenses $124,248231,15296,400$

Net income $$30,752$ $$55,048$ $$(34,400)$

Fixed expenses consist of $$308,000$ of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $$30,000($Tingler$),$ $$79,000($Shocker$),$ and $$34,800($Stunner$).$ 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 company$$s net income.

$($a$)$

Compute current net income for Cawley Company.

Net income $

$51400$

Correct answer

$($b$)$

Compute net income by product line and in total for Cawley Company if the company discontinues the Stunner product line. $($Hint: Allocate the $$308,000$ common costs to the two remaining product lines based on their relative sales.$)$

Tingler Net Income $

$-109066$

Incorrect answer

Shocker Net Income $

$-222134$

Incorrect answer

Total Net Income $

$-331200$

Incorrect answer

$($c$)$

Should Cawley eliminate the Stunner product line?

No

Correct answer

Why or why not?

Net income would

decrease

Correct answer from $

$51400$

Correct answerto $

$-331200$

Incorrect answer.