Differential Analysis for a Discontinued Product A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales $235,000 Cost of goods sold 112,000 Gross profit $123,000 Operating expenses 143,000 Loss from operations $(20,000) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss Differential Analysis Continue Fruit Cola (Alt. 1) or Discontinue Fruit Cola (Alt. 2) January 5 Continue Fruit Cola Discontinue Fruit Cola Differential Effect on (Alternative 1) (Alternative 2) Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses 1000 00001 0000 Fixed costs Income (Loss) Differential Analysis for a Lease or Sell Decision Granite Construction Company is considering selling excess machinery with a book value of $281,500 (original cost of $400,000 less accumulated depreciation of $118,500) for $277,400, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,900 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,700. a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) November 7 Lease Machinery Sell Machinery (Alternative 1) (Alternative 2) (Alternative 2) Revenues Differential Effect on Income Costs Income (Loss) Target Costing Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $23,500. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $20,000 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). a. What price will Basic establish for the QuikCar for the upcoming model year? its b. Since the estimated manufacturing cost exceeds the target cost, Basic must reduce total costs to maintain competitive pricing within its profit objectives. Total Cost Method of Product Pricing Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 3,000 units of cell phones are as follows: Variable costs: Fixed costs: Direct materials $ 74 per unit Factory overhead 5296,000 Direct labor 34 Selling and administrative expenses 104,000 Factory overhead 22 Selling and administrative expenses Total variable cost per unit $148 per unit Smart Stream desires a profit equal to a 15% return on invested assets of s844,800. a. Determine the total cost and the total cost amount per unit for the production and sale of 8,000 units of cellular phones. Round the cost per unit to two decimal places. 18 Total cost Total cost amount per unit b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones. c. Determine the selling price of cellular phones. Round to the nearest cent. per cellular phone