Managerial Accounting (ACCO 504):

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K L N B C D E F G H J M A Exercise 25-4 Name: Section: Score: _0% Key Code: [Key code here] Instructions Answers are entered in the cells with gray backgrounds. 10 Cells with non-gray backgrounds are protected and cannot be edited. 1 An asterisk (") will appear to the right of an incorrect entry. 12 Enter a zero in cells you would otherwise leave blank. 13 Differential Analysis 14 a 15 Continue or Discontinue Cups 16 March 31, 2016 Continue Discontinue Differential Effect 17 Cups Cups on Income 18 (Alternative 2) [Alternative 2) 19 (Alternative 1) 20 Revenues 21 Costs: 22 Variable cost of goods sold 23 Variable selling and admin. expenses 24 Fixed costs 25 Income (loss) 26 27 28 b. 29 The Cups line should be since income 31 would by if the cups were discontinued. 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Ex. 25-4 + ListoEX 25-4 Differential analysis for a discontinued product The condensed product-line income statement for Dish N' Dat Company for the month of March is as follows: X Dish N' Dat Company Product-Line Income Statement For the Month Ended March 31, 2016 Bowls Plates Cups Sales $71,000 $105,700 $31,300 Cost of goods sold 32,600 42,300 16,800 Gross profit $38,400 $ 63,400 $14,500 Selling and administrative expenses 27,400 42,800 16,700 Income from operations $11,000 $ 20,600 $ (2,200)Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Dish N' Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated March 31, 2016, to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). b. Should the Cups line be retained? Explain