eBook Calculator 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 $64,100 $89,200 $27,700 Cost of goods sold (26,900) (32,300) (14,700) Gross profit $37,200 $56,900 $13,000 Selling and administrative expenses (30,000) (34,900) (16,000) Operating income (loss) $7,200 $27,000 $(3,000) Fixed costs are 15% of the cost of goods sold and 36% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be material affected if the Gloves line were discontinued a. Prepare a differential analysis dated October 31 to determine if Murfers should be continued (Aternative 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 Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues 64,100 X a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amour 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 Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues 64,100 X Costs: Variable cost of goods sold -73.900 X Variable selling and admin, expenses Fixed costs 0 Proft (Loss) Feedback Check My Work For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fixed costs. Determine the effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. b. Should the Mufflers line be retained? Yes Segment analysis for a service company Charles Schwab Corporation (SCHW) is one of the more innovative brokerage and financial service companies in the United States. The company recently provided information about its major business segments as follows (in millions): Investor Services Advisor Services Revenues $5,411 $2,067 Operating income 2,031 962 Depreciation 180 54 7. Advertising Variable Cost c. Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs. Investor Services Advisor Services (in millions) (in millions) Estimated contribution margin d. If Schwab decided to sell its "Advisor Services" accounts to another company, estimate how much operating income would decline under the following assumptions. Assume the fixed costs that serve Advisor investors would not be sold but would be used by the other sector: $ million Assume the fixed assets were sold": $ million