Differential Analysis Report for a Discontinued Product

The condensed product-line income statement for Porcelain Tableware Company is as follows:

PORCELAIN TABLEWARE COMPANY Product-Line Income Statement
	Bowls			Plates			Cups
Sales	$660,000			$885,000			$276,000
Cost of goods sold	(261,000)			(332,000)			(153,000)
Gross profit	$399,000			$553,000			$123,000
Selling and administrative expenses	(300,000)			(357,000)			(157,000)
Operating income (loss)	$99,000			$196,000			$(34,000)

Fixed costs are 35% of the cost of goods sold and 16% of the selling and administrative expenses. Porcelain Tableware 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.

PORCELAIN TABLEWARE COMPANY
Product Income
Differential Analysis Report
	Bowls	Plates	Cups
Differential revenue from monthly sales:
	$	$	$
Differential costs of monthly sales:
	$	$	$
	$	$	$
Monthly differential income from sales	$	$	$

b. Which of the following statements about the Cups line is true?