Differential Analysis for a Discontinued Product

The condensed product$-$line income statement for Suffolk China Ware Company for the month of May is as follows:

Suffolk China Ware Company

Product$-$Line Income Statement

For the Month Ended May $31$

Bowls Plates Cups

Sales $$65,800$ $$89,300$ $$26,100$

Cost of goods sold $26,80033,20014,500$

Gross profit $$39,000$ $$56,100$ $$11,600$

Selling and administrative expenses $28,90034,70015,300$

Income from operations $$10,100$ $$21,400$ $$(3,700)$

Fixed costs are $13\%$ of the cost of goods sold and $36\%$ of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

Question Content Area

a$.$ Prepare a differential analysis dated May $31$ to determine whether to Continue Cups $($Alternative $1)$ or Discontinue Cups $($Alternative $2).$ If an amount is zero, enter $"0".$ For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis

Continue Cups $($Alt$.1)$ or Discontinue Cups $($Alt$.2)$

For the Month Ended May $31$

Continue Cups

$($Alternative $1)$ Discontinue Cups

$($Alternative $2)$ Differential Effect

$($Alternative $2)$

Revenues $fill in the blank f$551$c$7$fdb$07801$e$\_1$

$fill in the blank f$551$c$7$fdb$07801$e$\_2$

$fill in the blank f$551$c$7$fdb$07801$e$\_3$

Costs:

Variable cost of goods sold fill in the blank f$551$c$7$fdb$07801$e$\_4$

fill in the blank f$551$c$7$fdb$07801$e$\_5$

fill in the blank f$551$c$7$fdb$07801$e$\_6$

Variable selling and admin. expenses fill in the blank f$551$c$7$fdb$07801$e$\_7$

fill in the blank f$551$c$7$fdb$07801$e$\_8$

fill in the blank f$551$c$7$fdb$07801$e$\_9$

Fixed costs fill in the blank f$551$c$7$fdb$07801$e$\_10$

fill in the blank f$551$c$7$fdb$07801$e$\_11$

fill in the blank f$551$c$7$fdb$07801$e$\_12$

Profit $($loss$)$ $fill in the blank f$551$c$7$fdb$07801$e$\_13$

$fill in the blank f$551$c$7$fdb$07801$e$\_14$

$fill in the blank f$551$c$7$fdb$07801$e$\_15$

Question Content Area

b$.$ Should the Cups line be retained? Explain.

As indicated by the differential analysis in part $($a$),$ the income will

by $fill in the blank fc$61$d$3$ffef$8302$c$\_3$

if the Cups line is discontinued.