imported_orlando's homeslice
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This is how the problem goes, i tried to line up the numbers as best as possible
Nichols Company makes three models of phasers. Information on the three products is given below.
Stunner Double-Set Mega-Power
Sales $300,000 $500,000 $200,000
Variable expenses 150,000 200,000 140,000
Contribution margin 150,000 300,000 60,000
Fixed expenses 120,000 225,000 90,000
Net income $30,000 $75,000 ($30,000)
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 (Stunner), $75,000 (Double-Set), and $30,000 (Mega-Power). 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.
Ralph Port, an executive with the company, feels the Mega-Power line should be discontinued to increase the company's net income.
1. Compute current net income for Nichols Company.
Nichols Company makes three models of phasers. Information on the three products is given below.
Stunner Double-Set Mega-Power
Sales $300,000 $500,000 $200,000
Variable expenses 150,000 200,000 140,000
Contribution margin 150,000 300,000 60,000
Fixed expenses 120,000 225,000 90,000
Net income $30,000 $75,000 ($30,000)
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 (Stunner), $75,000 (Double-Set), and $30,000 (Mega-Power). 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.
Ralph Port, an executive with the company, feels the Mega-Power line should be discontinued to increase the company's net income.
1. Compute current net income for Nichols Company.