Question
Sheffield Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner Sales $302,100 $502,400 $202,400 Variable expenses 150,900
Sheffield Company makes three models of tasers. Information on the three products is given below.
Tingler Shocker Stunner Sales $302,100 $502,400 $202,400
Variable expenses 150,900 193,100 137,700
Contribution margin 151,200 309,300 64,700
Fixed expenses 120,719 232,632 96,249
Net income $30,481 $76,668 $(31,549)
Fixed expenses consist of $304,700 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $29,300 (Tingler), $80,600 (Shocker), and $35,000 (Stunner). 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.
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 Sheffield Company.
Net income | $enter the net income in dollars |
(b) Compute net income by product line and in total for Sheffield Company if the company discontinues the Stunner product line. (Hint: Allocate the $304,700 common costs to the two remaining product lines based on their relative sales.) (Round answers to the nearest whole dollar, e.g. 5,275.)
Tingler Net Income | $enter a dollar amount | ||
---|---|---|---|
Shocker Net Income | $enter a dollar amount | ||
Total Net Income | $enter a dollar amount |
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