Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Line Item Description Amount

A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year:

Line Item Description Amount
Sales $232,100
Cost of goods sold (112,000)
Gross profit $120,100
Operating expenses (146,000)
Operating loss $(25,900)

It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Vim Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

Question Content Area

a. Prepare a differential analysis dated November 2 to determine whether Vim Cola 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.

Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Vim Cola November 2
Line Item Description Continue Vim Cola (Alternative 1) Discontinue Vim Cola (Alternative 2) Differential Effects (Alternative 2)
Revenues $Revenues $Revenues $Revenues
Costs:
Variable cost of goods sold Variable cost of goods sold Variable cost of goods sold Variable cost of goods sold
Variable operating expenses Variable operating expenses Variable operating expenses Variable operating expenses
Fixed costs Fixed costs Fixed costs Fixed costs
Profit (loss) $Profit (loss) $Profit (loss) $Profit (loss)

Feedback Area

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions