Question
Safe and Secure, Inc. produces three models of home security systems. Information on the three products is given below: Assurance Decoder Burglar Beware Sales $455,400
Safe and Secure, Inc. produces three models of home security systems. Information on the three products is given below:
Assurance | Decoder | Burglar Beware | |||||
Sales | $455,400 | $759,000 | $303,600 | ||||
Variable expenses | 227,700 | 303,600 | 212,520 | ||||
Contribution margin | 227,700 | 455,400 | 91,080 | ||||
Fixed expenses | 176,400 | 345,000 | 142,800 | ||||
Net income | $51,300 | $110,400 | $(51,720 | ) |
Fixed expenses consist of $446,600 of common costs allocated to the three products based on relative sales, and additional fixed costs of $44,400 (Assurance), $121,400 (Decoder), and $51,800 (Burglar Beware). The common costs will be incurred regardless of how many models are produced. The other fixed expenses would be eliminated if a model is phased out. Matt Dillon, an executive with the company with extensive law enforcement background, feels that the Burglar Beware line should be discontinued to increase the companys net income.
(a)
Correct answer iconYour answer is correct.
Compute current net income for Safe and Secure, Inc. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)
Net income | $109980 |
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(b)
Compute net income by product line and in total for Safe and Secure, Inc., if the company discontinues the Burglar Beware product line. (Hint: Allocate the $446,600 common costs to the two remaining product lines based on their relative sales.) (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)
Assurance | Decoder | Company Total | ||||
Net income | $ | $ | $ |
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