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Cawley Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner Sales 304000 496000 200000 Variable Expenses 149800

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

Tingler Shocker Stunner
Sales 304000 496000 200000
Variable Expenses 149800 193300 139400
Contribution Margin 154200 302700 60600
Fixed Expenses 119984 226816 93200
Net Income 34216 75884 (32600)

Fixed expenses consist of $296,000 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), $80,000 (Shocker), and $34,000 (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 Cawley Company.

Net income $

(b) Compute net income by product line and in total for Cawley Company if the company discontinues the Stunner product line. (Hint: Allocate the $296,000 common costs to the two remaining product lines based on their relative sales.)

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

(c) Should Cawley eliminate the Stunner product line? NoYes Why or why not?

Net income would increasedecrease from $ to $

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