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	$64,900			$89,600			$26,400
Cost of goods sold	(27,200)			(32,300)			(15,000)
Gross profit	$37,700			$57,300			$11,400
Selling and administrative expenses	(30,100)			(35,900)			(15,800)
Operating income (loss)	$7,600			$21,400			$(4,400)

Fixed costs are 17% of the cost of goods sold and 39% 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 "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers
October 31
	Continue Mufflers (Alternative 1)	Discontinue Mufflers (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank e6533d019f9f002_1	$fill in the blank e6533d019f9f002_2	$fill in the blank e6533d019f9f002_3
Costs:
Variable cost of goods sold	fill in the blank e6533d019f9f002_4	fill in the blank e6533d019f9f002_5	fill in the blank e6533d019f9f002_6
Variable selling and admin. expenses	fill in the blank e6533d019f9f002_7	fill in the blank e6533d019f9f002_8	fill in the blank e6533d019f9f002_9
Fixed costs	fill in the blank e6533d019f9f002_10	fill in the blank e6533d019f9f002_11	fill in the blank e6533d019f9f002_12
Profit (Loss)	$fill in the blank e6533d019f9f002_13	$fill in the blank e6533d019f9f002_14	$fill in the blank e6533d019f9f002_15

b. Should the Mufflers line be retained?