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 $64,500 $89,100 $27,600 (26,200) (33,100) (14,100) $38,300 $56,000 $13,500 (28,600) (35,800) (14,400) $9,700 $20,200 $(900) Fixed costs are 14% of the cost of goods sold and 41% 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) 27,600 0 0 0 27,600