Wildhorse Company makes three models of tasers. Information on the three products is given below. Tingler...
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Wildhorse Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner $304,000 $496,000 $200,000 Sales Variable expenses 147,900 192,600 143,100 Contribution margin 156,100 303,400 56,900 Fixed expenses 118.984 226,016 94,000 Net income $37.116 $77,384 $(37.100) 4 Fixed expenses consist of $296,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29,000 (Tingler), $79,200 (Shocker), and $34,800 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income. (a) Compute current net income for Wildhorse Company. Net income (b) Compute net income by product line and in total for Wildhorse Company if the company discontinues the Stunner product line. (Hint: Allocate the $296,000 common costs to the two remaining product lines based on their relative sales.) Tingler Net Income $ Shocker Net Income Total Net Income $ (c) Should Wildhorse eliminate the Stunner product line? Why or why not? Net income would from 5 to $ Wildhorse Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner $304,000 $496,000 $200,000 Sales Variable expenses 147,900 192,600 143,100 Contribution margin 156,100 303,400 56,900 Fixed expenses 118.984 226,016 94,000 Net income $37.116 $77,384 $(37.100) 4 Fixed expenses consist of $296,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29,000 (Tingler), $79,200 (Shocker), and $34,800 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income. (a) Compute current net income for Wildhorse Company. Net income (b) Compute net income by product line and in total for Wildhorse Company if the company discontinues the Stunner product line. (Hint: Allocate the $296,000 common costs to the two remaining product lines based on their relative sales.) Tingler Net Income $ Shocker Net Income Total Net Income $ (c) Should Wildhorse eliminate the Stunner product line? Why or why not? Net income would from 5 to $
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a Tingler Shocker Stunner Total Sales 304000 496000 200000 1... View the full answer
Related Book For
Accounting Principles
ISBN: 978-0470534793
10th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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