Differential Analysis for a Discontinued Product

The condensed product-line income statement for Porcelain Tableware Company for the month of May is as follows:

Porcelain Tableware Company Product-Line Income Statement For the Month Ended May 31
	Bowls			Plates			Cups
Sales	$64,100			$90,300			$26,900
Cost of goods sold	25,700			33,200			15,000
Gross profit	$38,400			$57,100			$11,900
Selling and administrative expenses	28,900			35,500			14,800
Income from operations	$9,500			$21,600			$(2,900)

Fixed costs are 16% of the cost of goods sold and 40% of the selling and administrative expenses. Porcelain Tableware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (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.

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

As indicated by the differential analysis in part (a), the income will decrease by $ if the Cups line is discontinued.

CH 25 Problems eBook Calculator Differential Analysis for a Discontinued Product The condensed product-line income statement for Porcelain Tableware Company for the month of May is as follows: Porcelain Tableware Company Product-Line Income Statement For the Month Ended May 31 Bowls $64,100 Cups $26,900 Sales 25,700 Plates $90,300 33,200 $57,100 35,500 Cost of goods sold Gross profit 15,000 $11,900 $38,400 28,900 Selling and administrative expenses 14,800 Income from operations $9,500 $21,600 $(2,900) Fixed costs are 16% of the cost of goods sold and 40% of the selling and administrative expenses. Porcelain Tableware assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (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 Discontinue Cups (Alternative 1) (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Income (Loss) b. Should the Cups line be retained? Explain. Yes As indicated by the differential analysis in part (a), the income will decrease by $ x if the Cups line is discontinued. Check My Work Omore Check My Work uses remaining. Assignment Score: 94.63% All work saved. Email Instructor Save and Exit Submit Assignment for Grading