Discontinue a Segment Product AG52 has revenues of $194,300, variable cost of go

Question

Discontinue a Segment Product AG52 has revenues of $194,300, variable cost of goods sold of $113,600, variable selling expenses of $32,700, and fixed costs of $58,000, creating a loss from operations of $10,000 a. Prepare a differential analysis as of October 7 to determine if Product AG52 should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "O". Use a minus sign to indicate a loss Differential Analysis Continue Product AG52 (Alt. 1) or Discontinue Product AG52 (Alt. 2) October 7 Continue Product AG52 (Alternative 1) Differential Effect on Income Alternative 2) Discontinue Product AG52 (Alternative 2) Revenues 0 Costs Variable cost of goods sold Variable selling expenses Fixed costs 0 Income (Loss) b. Determine if Product AG52 should be continued (Alternative 1) or discontinued (Alternative 2)

Explanation / Answer

Differential analysis :

b) Product AG52 should be continue

Continue product AG52 Discontinue product AG52 Differential effect on income Revenues 194300 0 -194300 Costs: Variable cost of goods sold -113600 0 113600 Variable selling expense -32700 0 32700 Fixed cost -58000 -58000 0 Income (loss) -10000 -58000 -48000

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