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			$26,400
Cost of goods sold	(25,900)			(31,900)			(14,800)
Gross profit	$39,300			$58,200			$11,600
Selling and administrative expenses	(30,300)			(34,500)			(14,700)
Operating income (loss)	$9,000			$23,700			$(3,100)

Fixed costs are 15% of the cost of goods sold and 42% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued.

Question Content Area

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 138460f9a04d062_1	$fill in the blank 138460f9a04d062_2	$fill in the blank 138460f9a04d062_3
Costs:
Variable cost of goods sold	fill in the blank 138460f9a04d062_4	fill in the blank 138460f9a04d062_5	fill in the blank 138460f9a04d062_6
Variable selling and admin. expenses	fill in the blank 138460f9a04d062_7	fill in the blank 138460f9a04d062_8	fill in the blank 138460f9a04d062_9
Fixed costs	fill in the blank 138460f9a04d062_10	fill in the blank 138460f9a04d062_11	fill in the blank 138460f9a04d062_12
Profit (Loss)	$fill in the blank 138460f9a04d062_13	$fill in the blank 138460f9a04d062_14	$fill in the blank 138460f9a04d062_15

Question Content Area

b. Should the Mufflers line be retained?

YesNo