Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, as well as direct fi
xed expenses unique to each model of $30,000 (Tingler), $79,500 (Shocker), and $34,300 (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.
2 answers:
Question: The question is not complete. Find below the complete quesion and the answer.
Cawley Company makes three models of tasers. Information on the three products is given below.
Tingler Shocker Stunner
Sales $300,000 $500,000 $200,000
Variable expenses 150,000 200,000 145,000
Contribution margin 150,000 300,000 55,000
Fixed expenses 120,000 230,000 95,000
Net income $ 30,000 $70,000 $(40,000)
Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $30,000 (Tingler), $80,000 (Shocker), and $35,000 (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.
1. Compute current net income for Crawley company
2. Compute net income after dropping the stunner line model
Answer:
1. Current net income = $60,000
2. net income = $40,000
Explanation:
See the attached file for the calculation
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Answer:
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- United Continental with a capital expenditure of 60.68%
- Southwest Airlines with a capital expenditure of 51.38%
Explanation:
Since United Continental's purchases of Boeing planes represent over 60% of their capital expenditures, this means that Boeing had to be the primary plane supplier. Even if the company purchased planes form other manufacturer, their purchases would not even be 40% of the company's purchases.
The same applies to Southwest Airlines, even though the purchases from Boeing are a little lower, they are still over 51%. This means the company could not have spent more money on purchasing planes from another company. The maximum purchase from another airplane manufacturer would have been less than 49% at most.
Besides the previous analysis, you must also consider that the company spends money on things besides airplanes, e.g. new training facilities, equipment, computer software, other vehicles, etc.
