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Differential Analysis Report for a Discontinued Product The condensed product-line income statement for Suffolk China Ware Company is as follows: SUFFOLK CHINA WARE COMPANY Product-Line
Differential Analysis Report for a Discontinued Product
The condensed product-line income statement for Suffolk China Ware Company is as follows:
SUFFOLK CHINA WARE COMPANY Product-Line Income Statement | ||||||||
Bowls | Plates | Cups | ||||||
Sales | $653,000 | $887,000 | $279,000 | |||||
Cost of goods sold | (256,000) | (325,000) | (156,000) | |||||
Gross profit | $397,000 | $562,000 | $123,000 | |||||
Selling and administrative expenses | (301,000) | (344,000) | (148,000) | |||||
Operating income (loss) | $96,000 | $218,000 | $(25,000) |
Fixed costs are 38% of the cost of goods sold and 17% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be significantly affected if the Cups line were discontinued.
a. Prepare a differential analysis report for all three products.
SUFFOLK CHINA WARE COMPANY | |||
Product Income | |||
Differential Analysis Report | |||
Bowls | Plates | Cups | |
Differential revenue from monthly sales: | |||
$fill in the blank | $fill in the blank | $fill in the blank | |
Differential costs of monthly sales: | |||
$fill in the blank | $fill in the blank | $fill in the blank | |
fill in the blank | fill in the blank | fill in the blank | |
$fill in the blank | $fill in the blank | $fill in the blank | |
Monthly differential income from sales | $fill in the blank | $fill in the blank | $fill in the blank |
b. Which of the following statements about the Cups line is true?
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