Reference no: EM133535538

Case Study: Sandhill Company makes three models of tasers.

Tingler:

Sales $296,000

Variable expenses $151,700

Contribution Margin $144,300

Fixed expenses $117,800

Net income $26,500

Shocker:

Sales $504,000

Variable expenses $207,900

Contribution Margin $296,100

Fixed expenses $231,800

Net income $64,300

Stunner:

Sales $200,000

Variable expenses $138,200

Contribution Margin $61,800

Fixed expenses $95,000

Net income $(33,200)

Question: Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29,000 (Tingler), $80,600 (Shocker), and $35,000 (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. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's new income. Compute current net income for Sandhill Company.