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 Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income (loss) Hats Gloves Mufflers $64,700 $90,200 $26,500 (26,200) (32,900) (15,200)) $38,500 $57,300 $11,300 (30,300) (33,900) (16,100) $8,200 $23,400 $(4,800) Fixed costs are 17% of the cost of goods sold and 37% 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 Discontinue Mufflers Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin expenses 00 00 Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income (loss) $64,700 $90,200. $26,500 (26,200) (32,900) (15,200) $38,500 $57,300 $11,300 (30,300) (33,900) (16,100) $8,200 $23,400 $(4,800) Fixed costs are 17% of the cost of goods sold and 37% 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 Discontinue Mufflers Differential Effects Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) b. Should the Mufflers line be retained? (Alternative 1) (Alternative 2) (Alternative 2)