3.4

Differential Analysis for a Discontinued Product A condensed income statement by product line for Lavonia Beverage Ine indicated the foliowing for Vim Cola for the past year: It is estimated that 1446 of the cost of goods sold represents fixed factory overhead costs and that 18\% of the operating expenses are fixed. Because Vim Cola is only onn of many preducts, the fored costs will not be materialiy affected if the product is biscontinued. a. Prepare a differential analysis dated November 2 to determine whether Vim Cola should be continued (Aiternative 1 ) or discontinued (Aiternative 2). If an amount is zero, enter "0*, if required, use a minus sign to indicate a loss. Pizana Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit. The company, which is currentiy oparating below full capocity, charges factory overhead to production at the rate of 37% of direct labor cost. The unit costs to produce comparable carrying cases are expected ta be as follows: If Pizana Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 13% of the direct labor costs. a. Prepare a differential analysis dated May 31 to determine whether the company should make (Aiternative 1 ) or buy (Aiternative 2) the carrying case. Round your answers to two decimal places. If an amount is zero, enter " 0