Question

Safe and Secure, Inc. produces three models of home security systems. Information on the three products is given below:

		Assurance		Decoder		Burglar Beware
Sales		$441,900		$736,500		$294,300
Variable expenses		220,950		294,600		206,010
Contribution margin		220,950		441,900		88,290
Fixed expenses		181,100		339,900		142,100
Net income		$39,850		$102,000		$(53,810	)

Fixed expenses consist of $444,600 of common costs allocated to the three products based on relative sales, and additional fixed costs of $44,200 (Assurance), $120,900 (Decoder), and $53,400 (Burglar Beware). 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.

Matt Dillon, an executive with the company with extensive law enforcement background, feels that the Burglar Beware line should be discontinued to increase the company’s net income

Compute net income by product line and in total for Safe and Secure, Inc., if the company discontinues the Burglar Beware product line. (Hint: Allocate the $444,600 common costs to the two remaining product lines based on their relative sales.) (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)

		Assurance		Decoder		Company Total
Net income		$		$		$

Answer 1