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Oriole Company makes three models of phasers. Information on the three products is given below: Fixed costs consist of $288,500 of common costs allocated to
Oriole Company makes three models of phasers. Information on the three products is given below: Fixed costs consist of $288,500 of common costs allocated to the three products based on relative sales, and additional fixed costs of $29,100 (Stunner), $76,600 (Double-Set), and $30.000 (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. Mark Harris, 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 Oriole Company if the company discontinues the Mega-Power product line: (Hint: Allocate the $288,500 common costs to the two remaining product lines based on their relative sales)
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