Mastery Problem: Differential Analysis and Product Pricing WoolCorp WoolCorp buys sheep's wool from farmers. The company began operations in January of this year, and is making decisions on product offerings, pricing. and vendors. The company is also examining its method of assigning overhead to products. You've just been hired as a production manager at WoolCorp. Currently WoolCorp makes three products: (1) raw, dean wool to be used as stuifing or insulation; (2) wool yarn for use in the textile industry, and (3) extra-thick yarn for use in rugs. Upper management would like your recommendations regarding a production decision regarding their current and proposed product lines: Continue/Discontinue For the past year, WoolCorp has experimented with its third product, extra-thick rup yarn. The company wishes to consider whether to continue or discontinue manufacturing and selling this product. You decide to prepare a diferental andalyis of the income related to all three products. To begin your analysis, you review the following condensed income statement. Then scroll down to complete the differential analysis. Complete the following table using the data in the preceding income statement to compare the effects of dropping the rug yam line of products, If required, use a minus sign to indicate a loss. Differential Analysis Continue Rug Yarn (Alternative 1) or Discontinue Rug Yarn (Alternative 2) December 31. 20Y8 Final Questions Answer the following question (1), then fili in table (2). 1. After reviewing your work on the continuevDiscontinue panel, should woolcorp continue (Alternative 1) or discontinue (Alternative 2) the rua varn product line? 2. The following table shows several business decisions that mightneed to be made across the top. row. Along the left-hand column. these-are impcirta? factors to consider: Select the factorie) that are importanis to the dedishon. Select alf that apoly if the factor is not important to amy of the deciliont, solect IYes ion the. What Imnortant' drondown, otherwise select "no:. Contribation margin per bottleneck hour Differenthal revenue is more than cifferential cost. Suppler price is less than Woolcorp's variable cost per unit Impact on regular prices Contribution margin per bottleneck hour Ditferential revenue is more than differential cost Supplier price is less than Woolcorp's variable cost per unit Robinson- Patman Act