Differential Analysis for a Discontinued Product The condensed product-line inco

Question

Differential Analysis for a Discontinued Product

The condensed product-line income statement for Porcelain Tableware Company for the month of December is as follows:

Fixed costs are 13% of the cost of goods sold and 44% of the selling and administrative expenses. Porcelain Tableware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated December 31, 2014, to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0".

Differential Analysis

Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2)

December 31, 2014

Continue Cups (Alternative 1)

Discontinue Cups (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues

$  

$  

$  

Costs:

Variable cost of goods sold

  

  

  

Variable selling and admin. expenses

  

  

  

Fixed costs

  

  

  

Income (Loss)

$  

$  

$  

Porcelain Tableware Company
Product-Line Income Statement
For the Month Ended December 31, 2014 Bowls Plates Cups Sales $64,100 $90,300 $27,700 Cost of goods sold 27,100 32,400 15,400 Gross profit $37,000 $57,900 $12,300 Selling and administrative expenses 28,500 35,600 14,600 Income from operations $8,500 $22,300 $(2,300)

Explanation / Answer

Continue Cups (Alternative 1) Discontinue Cups (Alternative 2) Differential Effect on Income (Alternative 2) Revenues 182100 154400 -27700 Costs: Variable cost of goods sold 74900 59500 -15400 Variable selling and admin. expenses 78700 64100 -14600 Fixed costs 44365 35939 -8426 Income (Loss) -15865 -5139 10726 Continue Cups (Alternative 1) Discontinue Cups (Alternative 2) 13% of COGS 9737 7735 44% of Selling & Admin 34628 28204 Total Fixed Cost 44365 35939

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.