Differential Analysis for a Discontinued Product The condensed product-line income statement for Northern Lights Company for the month of August is as follows: Northern Lights Company Product-Line Income Statement For the Month Ended August 31 Hats Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income (loss) $600,000 (400,000) $200,000 (75,000) $125,000 Gloves $1,400,000 (700,000) $700,000 (300,000) $400,000 Line Item Description Fixed costs are 30% of the cost of goods sold and 15% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were discontinued. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Socks September 14 Socks $375,000 (345,000) $30,000 (50,000) $(20,000) a. Prepare a differential analysis dated September 14 to determine if Socks 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. Continue Discontinue Differential Socks Socks Effects (Alternative 1) (Alternative 2) (Alternative 2)

Differential Analysis for a Discontinued Product The condensed product-line income statement for Northern Lights Company for the month of August is as follows: Fixed costs are 30% of the cost of goods sold and 15% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were discontinued. a. Prepare a differential analysis dated September 14 to determine if Socks 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. a. Prepare a differential analysis dated September 14 to determine if Socks should be continued (Avernative 1) or discontinued (Alternative 2), If an amount is zero, enter " 0 ", If required, use a minus sign to indicate a loss