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Ivanhoe Company makes three models of phasers. Information on the three products is given below: Fixed costs consist of $297,000 of common costs allocated to
Ivanhoe Company makes three models of phasers. Information on the three products is given below: Fixed costs consist of $297,000 of common costs allocated to the three products based on relative sales, and additional fixed costs of $29,600 (Stunner), $74,300 (Double-Set), and $29,100 (Mega-Power). The common costs will be incurred regardiess of how many models are produced. The other fixed costs would be eliminated if a model is discontinued. Gary King, an executive with the company, feels the Mega-Power line should be discontinued to increase the company's net income Calculate net income by product line and in total for lvanhoe Company if the company discontinues the Mega-Power product line. (Hint: Allocate the $297,000 common costs to the two remaining product lines based on their relative calae1
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