Discontinue a Segment Product T has revenue of $195,900, variable cost of goods

Question

Discontinue a Segment

Product T has revenue of $195,900, variable cost of goods sold of $113,400, variable selling expenses of $31,800, and fixed costs of $58,200, creating a loss from operations of $7,500.

Prepare a differential analysis as of September 12, 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". Use a minus sign to indicate a loss.

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

Differential Analysis Continue Product T (Alt. 1) or Discontinue Product T (Alt. 2) September 12 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

1 2 3=2-1 CONTINUE DISCONTINUE DIFFERENCE PRODUCT T PRODUCT T Revenues 195900 0 -195900 Costs: Variable cost of goods sold 113400 0 -113400 Variable selling and admin. expenses 31800 0 -31800 Fixed costs 58200 58200 0 INCOME/(LOSS) =REVENUES-COSTS -7500 -58200 -50700 PRODUCT B SHOULD BE CONTINUED AS DIFFERENTIAL EFFECT IS NEGATIVE

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