1. PE.25-07A
2. PE.25-08A
3. PE.25-08.ALGO
4. PE.25-09B
5. EX.25-01
6. EX.25-02
7. EX.25-03
8. EX.25-04.ALGO
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10. EX.25-07
11. EX.25-09
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Differential Analysis for a Discontinued Product

The condensed product-line income statement for Porcelain Tableware Company for the month of May is as follows:

Porcelain Tableware Company Product-Line Income Statement For the Month Ended May 31
	Bowls		Plates		Cups
Sales	$65,700			$89,600			$25,900
Cost of goods sold	25,600			32,200			15,300
Gross profit	$40,100			$57,400			$10,600
Selling and administrative expenses	29,100			34,800			15,000
Income from operations	$11,000			$22,600			$(4,400)

Fixed costs are 17% of the cost of goods sold and 44% of the selling and administrative expenses. Porcelain Tableware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Continue Cups (Alternative 1)	Discontinue Cups (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)

b. Should the Cups line be retained? Explain.

Yes

As indicated by the differential analysis in part (a), the income will

decrease by __________ if the Cups line is discontinued.