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 $64,100 $89,700 $25,900 (26,600) (33,500) (14,300) $37,500 $56,200 $11,600 (29,000) (34,900) (14,400) $8,500 $21,300 $(2,800) Fixed costs are 16% 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. 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) Variable selling and admin. expenses Fixed costs Profit (Loss) Feedback Check My Work b. Should the Mufflers line be retained? Yes 13 $