Sunak Company sells different styles of tumblers. Below are the sales for the different models. Model A
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Question:
Sunak Company sells different styles of tumblers. Below are the sales for the different models.
Model A Tumbler | Model B Tumbler | Model C Tumbler | |||||
Sales | $297,000 | $496,900 | $201,800 | ||||
Variable expenses | 145,000 | 198,600 | 138,500 | ||||
Contribution margin | 152,000 | 298,300 | 63,300 | ||||
Fixed expenses | 120,000 | 235,000 | 97,000 | ||||
Net income | $32,000 | $63,300 | $(33,700) |
Fixed expenses consist of $308,100 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $29,000 (Model A), $80,400 (Model B), and $34,500 (Model C). 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.
The company is trying to evaluate whether it should discontinue Model C.
What is the current net income for the company?
What is the net income after the company discontinues Model C?
Should the company discontinue Model C? (type: Yes or type: No)
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