Models are produced, The common costs will be incurred

Models are produced

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Reference no: EM13924167

Cowley Company makes three models of tasters. Information on the three products is given below.

	Tingler	Shocker	Stunner
Sales	$296,800	$498,880	$201,230
Variable expenses	148,050	195,810	142,050
Contribution margin	148,750	303,070	59,180
Fixed expenses	116,005	225,299	93,201
Net income	$32,745	$77,771	$(34,021)

Fixed expenses consist of $291,400 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $29,249 (Tingler), $79,475 (Shocker), and $34,381 (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 company's net income.

Compute current net income for Cawley Company.

Net income

Reference no: EM13924167

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