Using Excel For Incremental Analysis for Elimination of a Product Line PROBLEM Cawley Company makes three models of tasers. Information on the three products is alven below. Sales Variable expenses Contribution margin Fixed expenses Net income 5 Shocker Stunner Tingler $300,000 $500,000 $ 200,000 150,000 200,000 150,000 300,000 120,000 230,000 145,000 55,000 95,000 30,000 $70,000 $ (40,000) 16 Fixed expenses consist of common costs allocated to the three products 7 based on relative sales, as well as direct fixed expenses unique to each model. The common costs will be incumed regardless of how many models 19 are produced. The direct fixed expenses would be eliminated if that model is 20 konda Thaen vad avanene amamantadham 21 22 Allocated fixed common costs 23 Direct fixed expenses: 24 Tingler 25 Shocker 26 Stunner 27 $ 300,000 30,000 80,000 35,000 Student Work Area Required: Provide input into cells shaded in yellow in this template. Use mathematical formulas with cell references to the Problem or work area as indicated. Use the SUM function with cel references to add amounts as Jadicalad a. Compute current net income for Cawley Company. Cument net income 60,000 b. Compute net income by product line and in total for Cawley Company the company discontinues the Stunner product line. (Hint: Allocate the $300,000 common costs to the two remaining product lines based on thair mlative colo Common cost allocation Tingler 142300 3 Shocker Tingler Shocker Total Salos 300,000 $ 500.000 800,000 Variable expenses 150000 200.000 350,000 Contribution margin 110,000 300.000 450.000 Fixed expenses 142,500 247500 410,000 Net income 500 0000 28 James Watt, an executive with the company, feels the Stunner Sne should 29 be discontinued to increase the company's net income. 30 31 32 c. Should Cawley eliminate the Stunner product ine? Why or why not? 36 37 Cawley the Stunner product line because eliminating will cause An elimination would result in margin of 1.000 of fixed expenses. ntine to decine of contribution with a malor decrease Q A $ T