Differential Analysis for a Discontinued Product The condensed productline 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 $65,600 $89,300 $26,500 Cost of goods sold (26,200) (33,600) (14,700) Gross profit $39,400 $55,700 $11,800 Selling and administrative expenses (29,600) (34,100) (16,200) Operating income (loss) $9,800 $21,600 $(4r400) ) 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 Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues $l 26,500l / $l ol J $l .26,500l v Costs: Variable cost of goods sold l -10,148| X l 0' ~/ l 10,148l X Variable selling and admin. expenses l -8.855| X l 0 l V/ l 8,855 l X Fixed costs l -8,294| X -8,294l x l oi v Profit (Loss) $l '797l X $l '8394l X $l 1497' X