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	$65,000			$90,300			$27,500
Cost of goods sold	(25,400)			(32,700)			(14,600)
Gross profit	$39,600			$57,600			$12,900
Selling and administrative expenses	(28,600)			(34,300)			(15,000)
Operating income (loss)	$11,000			$23,300			$(2,100)

Fixed costs are 14% of the cost of goods sold and 40% 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 (Alternative 1)	Discontinue Mufflers (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 591f5a025fd2fd4_1	$fill in the blank 591f5a025fd2fd4_2	$fill in the blank 591f5a025fd2fd4_3
Costs:
Variable cost of goods sold	fill in the blank 591f5a025fd2fd4_4	fill in the blank 591f5a025fd2fd4_5	fill in the blank 591f5a025fd2fd4_6
Variable selling and admin. expenses	fill in the blank 591f5a025fd2fd4_7	fill in the blank 591f5a025fd2fd4_8	fill in the blank 591f5a025fd2fd4_9
Fixed costs	fill in the blank 591f5a025fd2fd4_10	fill in the blank 591f5a025fd2fd4_11	fill in the blank 591f5a025fd2fd4_12
Profit (Loss)	$fill in the blank 591f5a025fd2fd4_13	$fill in the blank 591f5a025fd2fd4_14	$fill in the blank 591f5a025fd2fd4_15

b. Should the Mufflers line be retained?

YesNo