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 $65,500 $89,500 $26,200 (27,200) (32,800) (14,800) $38,300 $56,700 $11,400 (28,500) (34,400) (15,000) $9,800 $22,300 $(3,600) Fixed costs are 14% of the cost of goods sold and 36% 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 (Alternative 1) (Alternative 2) (Alternative 2). Next Cost of goods sold Gross profit Selling and administrative expenses Operating income (loss) (27,200) (32,800) (14,800) $38,300 $56,700 $11,400 (28,500) (34,400) (15,000) $9,800 $22,300 $(3,600) Fixed costs are 14% of the cost of goods sold and 36% 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 Muffiers 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 Discontinue Muffies Differential 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? Check My Work Next >