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Crane Company makes three models of tasers. Information on the three products is given below.

Tingler Shocker Stunner

Sales $296,000 $504,000 $200,000

Variable expenses 155,000 191,900 135,700

Contribution margin 141,000 312,100 64,300

Fixed expenses 116,024 227,276 92,800

Net income $24,976 $84,824 $(28,500)

Fixed expenses consist of $294,000 of common costs allocated to the three products based on relative sales, as well as direct �xed expenses unique to each model of $29,000 (Tingler), $79,100 (Shocker), and $34,000 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct �xed 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)

221 Exam 3 Ch 22-25

Question 10 of 20 - / 7.5

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Compute current net income for Crane Company.

Net income $

(b)

Compute net income by product line and in total for Crane Company if the company discontinues the Stunner product line. (Hint: Allocate the $294,000 common costs to the two remaining product lines based on their relative sales.)

Tingler Net Income $

Shocker Net Income $

Total Net Income $

(c)

Should Crane eliminate the Stunner product line?

Why or why not?

Net income would from $ to $ .

221 Exam 3 Ch 22-25

Question 10 of 20 - / 7.5

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221 Exam 3 Ch 22-25

Question 10 of 20 - / 7.5