Differential Analysis for a Discounted Product

Rhinebeck Company Product Line Income Statement For the Month Ended October 31 Hats Gloves Mufflers Sales $64,400 589,500 $27,000 Cost of goods sold (25,800) (33,600) (14,800) Gross profit $38,600 $55,900 $12,200 Selling and administrative expenses (30,400) (35,200) (16,000) Operating income (loss) $8,200 $20,700 $(3,800) Fixed costs are 16% 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. 2. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). It 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 27,000 39,000 Costs Variable cost of goods sold Variable selling and admin, expenses Fixed costs DIDI boll Profit (LOS)