Differential Analysis for a Discontinued Product The condensed product-line income statement for Rhinebeck Company for the...
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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 $64,800 $89,700 $26,800 Cost of goods sold (26,400) (32,300) (14,900) Gross profit $38,400 $57,400 $11,900 Selling and administrative expenses (29,600) (35,100) (14,900) Operating income (loss) $8,800 $22,300 $(3,000) Fixed costs are 12% of the cost of goods sold and 36% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 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 $ 26,800 $ 26,800 Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) b. Should the Mufflers line be retained? 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 $64,800 $89,700 $26,800 Cost of goods sold (26,400) (32,300) (14,900) Gross profit $38,400 $57,400 $11,900 Selling and administrative expenses (29,600) (35,100) (14,900) Operating income (loss) $8,800 $22,300 $(3,000) Fixed costs are 12% of the cost of goods sold and 36% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 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 $ 26,800 $ 26,800 Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) b. Should the Mufflers line be retained?
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Answer Solution a Differential Analysis Continue Alt1 or Discontinue Alt2 Mufflers ... View the full answer
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Accounting Texts and Cases
ISBN: 978-1259097126
13th edition
Authors: Robert Anthony, David Hawkins, Kenneth Merchant
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