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 $65,200 $90,100 $27,300 Cost of goods sold (27,300) (33,800) (13,800) Gross profit $37,900 $56,300 $13,500 Selling and administrative expenses (28,800) (34,800) (16,200) Operating income (loss) $9,100 $21,500 $(2,700) Fixed costs are 12% 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 "O". If required, use a minus sign to indicate a loss.Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) Feedback Check My Work For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2