Question
24-5 Differential Analysis for a Discontinued Product The condensed product-line income statement for Porcelain Tableware Company for the month of December is as follows: Porcelain
24-5
Differential Analysis for a Discontinued Product
The condensed product-line income statement for Porcelain Tableware Company for the month of December is as follows:
Porcelain Tableware Company Product-Line Income Statement For the Month Ended December 31, 2014 | ||||||||
Bowls | Plates | Cups | ||||||
Sales | $65,900 | $90,300 | $25,900 | |||||
Cost of goods sold | 25,500 | 32,000 | 14,000 | |||||
Gross profit | $40,400 | $58,300 | $11,900 | |||||
Selling and administrative expenses | 29,400 | 34,100 | 15,500 | |||||
Income from operations | $11,000 | $24,200 | $(3,600) |
Fixed costs are 12% of the cost of goods sold and 38% 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".
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