Carla Vista Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stun
Posted: Sun Jul 03, 2022 3:58 pm
Carla Vista Company makes three models of tasers.Information on the three products is given below.
Tingler
Shocker
Stunner
Sales
Variable expenses
Contribution margin
Fixed expenses
Net income
Fixed expenses consist of $306,000 of common costs allocatedto the three products based on relative sales, as well as directfixed expenses unique to each model of $29,000 (Tingler),$79,400 (Shocker), and $34,700 (Stunner). The commoncosts will be incurred regardless of how many models are produced.The direct fixed expenses would be eliminated if that model isphased out.James Watt, an executive with the company, feels the Stunner lineshould be discontinued to increase the company’s net income.(a)Compute current net income for Carla Vista Company.
(b)Compute net income by product line and in total for CarlaVista Company if the company discontinues the Stunner productline. (Hint: Allocate the $306,000 common costs tothe two remaining product lines based on their relativesales.)
Tingler Net Income
Shocker Net Income
Total Net Income
(c)Should Carla Vista eliminate the Stunner productline?select an option YesNoWhy or why not?
Tingler
Shocker
Stunner
Sales
Variable expenses
Contribution margin
Fixed expenses
Net income
Fixed expenses consist of $306,000 of common costs allocatedto the three products based on relative sales, as well as directfixed expenses unique to each model of $29,000 (Tingler),$79,400 (Shocker), and $34,700 (Stunner). The commoncosts will be incurred regardless of how many models are produced.The direct fixed expenses would be eliminated if that model isphased out.James Watt, an executive with the company, feels the Stunner lineshould be discontinued to increase the company’s net income.(a)Compute current net income for Carla Vista Company.
(b)Compute net income by product line and in total for CarlaVista Company if the company discontinues the Stunner productline. (Hint: Allocate the $306,000 common costs tothe two remaining product lines based on their relativesales.)
Tingler Net Income
Shocker Net Income
Total Net Income
(c)Should Carla Vista eliminate the Stunner productline?select an option YesNoWhy or why not?