Discontinue a Segment Product T has revenue of $194,600, variable cost of goods

Question

Discontinue a Segment

Product T has revenue of $194,600, variable cost of goods sold of $113,000, variable selling expenses of $32,000, and fixed costs of $59,200, creating a loss from operations of $9,600.

Prepare a differential analysis as of September 12, 2014, to determine if Product T should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter zero "0".

Differential Analysis

Continue Product T (Alt. 1) or Discontinue Product T (Alt. 2)

September 12, 2014

Continue Product T (Alternative 1)

Discontinue Product T (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues

$

$

$

Costs:

Variable cost of goods sold

Variable selling and admin. expenses

Fixed costs

Income (Loss)

$

$

$

Determine if Product T should be continued (Alternative 1) or discontinued (Alternative 2).

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Prepare a differential analysis as of September 12, 2014, to determine if Product T should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter zero "0".

Differential Analysis

Continue Product T (Alt. 1) or Discontinue Product T (Alt. 2)

September 12, 2014

Continue Product T (Alternative 1)

Discontinue Product T (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues

$

$

$

Costs:

Variable cost of goods sold

Variable selling and admin. expenses

Fixed costs

Income (Loss)

$

$

$

Explanation / Answer

Schedule of Effect of alternate Continue Product T (Alternative 1) Discontinue Product T(Alternative 2) Differential effect on Income (alternative 2) Revenues 194600 0 Costs: Variable cost of goods sold 113000 0 Veriable selling and administration expenses 32000 0 Fixed Cost 59200 59200 Income (Loss) -9600 -59200 -49600 If Product T is discontinued, then Income shall be reduced by $ 49,600

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