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Kingbird Company makes three models of phasers. Information on the three products is given below: Fixed costs consist of $292,000 of common costs allocated to
Kingbird Company makes three models of phasers. Information on the three products is given below: Fixed costs consist of $292,000 of common costs allocated to the three products based on relative sales, and additional fixed costs of $29,400 (Stunner), \$78,500 (Double-Set), and \$29,200 (Mega-Power). The common costs will be incurred regardless of how many models are produced. The other fixed costs would be eliminated if a model is discontinued. Donald Martin, an executive with the company, feels the Mega-Power line should be discontinued to increase the company's net income. Calculate current net income for Kingbird Company. (b) Calculate net income by product line and in total for Kingbird Company if the company discontinues the Mega-Power product line. (Hint: Allocate the $292,000 common costs to the two remaining product lines based on their relative sales.)
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