Question
Differential Analysis for a Discontinued Product The condensed product-line income statement for Dish N Dat Company for the month of March is as follows: Dish
Differential Analysis for a Discontinued Product
The condensed product-line income statement for Dish N Dat Company for the month of March is as follows:
Dish N Dat Company Product-Line Income Statement For the Month Ended March 31 | ||||||||
Bowls | Plates | Cups | ||||||
Sales | $64,700 | $90,400 | $26,700 | |||||
Cost of goods sold | 27,000 | 33,400 | 14,700 | |||||
Gross profit | $37,700 | $57,000 | $12,000 | |||||
Selling and administrative expenses | 29,700 | 34,600 | 14,500 | |||||
Income from operations | $8,000 | $22,400 | $(2,500) |
Fixed costs are 12% of the cost of goods sold and 41% of the selling and administrative expenses. Dish N Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued.
a. Prepare a differential analysis dated March 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss.
Differential Analysis | |||
Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) | |||
March 31 | |||
Continue Cups (Alternative 1) | Discontinue Cups (Alternative 2) | Differential Effect on Income (Alternative 2) | |
Revenues | $fill in the blank a77d910bb021015_1 | $fill in the blank a77d910bb021015_2 | $fill in the blank a77d910bb021015_3 |
Costs: | |||
Variable cost of goods sold | fill in the blank a77d910bb021015_4 | fill in the blank a77d910bb021015_5 | fill in the blank a77d910bb021015_6 |
Variable selling and admin. expenses | fill in the blank a77d910bb021015_7 | fill in the blank a77d910bb021015_8 | fill in the blank a77d910bb021015_9 |
Fixed costs | fill in the blank a77d910bb021015_10 | fill in the blank a77d910bb021015_11 | fill in the blank a77d910bb021015_12 |
Income (Loss) | $fill in the blank a77d910bb021015_13 | $fill in the blank a77d910bb021015_14 | $fill in the blank a77d910bb021015_15 |
b. Should the Cups line be retained?
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