3.2

Differential Analysis Report for a Discontinued Product The condensed product-line income statement for Suffolk China Ware Company is as follows: SUFFOLK CHINA WARE COMPANY Product-Line Income Statement Bowls Bowls Plates Cups Sales $653,000 $268,000 Cost of goods sold (253,000) $900,000 (319,000) $581,000 (139,000) Gross profit $400,000 $129,000 Selling and administrative expenses (304,000) (345,000) (147,000) Operating income (loss) $96,000 $236,000 $(18,000) Fixed costs are 40% of the cost of goods sold and 17% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be significantly affected if the Cups line were discontinued. a. Prepare a differential analysis report for all three products, SUFFOLK CHINA WARE COMPANY Product Income Differential Analysis Report Bowls Plates Differential revenue from monthly sales: Cups Differential costs of monthly sales: Monthly differential income from sales fl b. Which of the following statements about the Cups line is true