11.04 Differential Analysis

Differential Analysis for a Discontinued Product The condensed product-line income statement for Northern Lights Company for the month of August is as follows: Northern Lights Company Drodurt-line Tnrome Statement Fixed costs are 16% of the cost of goods sold and 38% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were discontinued. a. Prepare a differential analysis dated August 31 to determine if Socks should be continued (Alternative 1 ) or discontinued (Alternative 2 ). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. b. Should the Socks line be retained