Differential Analysis for a Discontinued Product The condensed product-line income statement for Rhinebeck Company for the month of October is as follows: Rhinebeck Company Product-Line Income Statement For the Month Ended October 31 Hats Gloves Mufflers Sales $65,100 $89,400 $26,400 Cost of goods sold (27,200) (33,800) (15,700) Gross profit $37,900 $55,600 $10,700 Selling and administrative expenses (29,900) (34,000) (15,700) Operating income (loss) $8,000 $21,600 $(5,000) Fixed costs are 12% of the cost of goods sold and 44% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "O". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses RUVU Sales $65,100 $89,400 $26,400 Cost of goods sold (27,200) (33,800) (15,700) Gross profit $37,900 $55,600 $10,700 Selling and administrative expenses (29,900) (34,000) (15,700) Operating income (loss) $8,000 $21,600 $(5,000) Fixed costs are 12% of the cost of goods sold and 44% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "O". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) b. Should the Mufflers line be retained