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A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: $232,900 109,000 $123,900 142,000 $(18,100) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. Sales Cost of goods sold Gross profit Operating expenses Loss from operations a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero enter zero "0" Use a minus sign to indicate a loss.

A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: $232,900 109,000 $123,900 142,000 $(18,100) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. Sales Cost of goods sold Gross profit Operating expenses Loss from operations a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero enter zero "0" Use a minus sign to indicate a loss.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2.)
a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Revenues Costs: Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) January 21 Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) Feedback Check My Work Continue King Discontinue King Cola (Alternative 1) Cola (Alternative 2) $ b. Should Star Cola be retained? Explain. Yes ✓ As indicated by the differential analysis in part (A), the income would decrease Differential Effect on Income (Alternative 2) ✓by $ if the product is discontinued.
Transcribed Image Text:a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Revenues Costs: Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) January 21 Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) Feedback Check My Work Continue King Discontinue King Cola (Alternative 1) Cola (Alternative 2) $ b. Should Star Cola be retained? Explain. Yes ✓ As indicated by the differential analysis in part (A), the income would decrease Differential Effect on Income (Alternative 2) ✓by $ if the product is discontinued.
Differential Analysis for a Discontinued Product A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: $232,900 109,000 $123,900 142,000 $(18,100) Sales Cost of goods sold Gross profit Operating expenses Loss from operations It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since King Cola is only one. of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.
Transcribed Image Text:Differential Analysis for a Discontinued Product A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: $232,900 109,000 $123,900 142,000 $(18,100) Sales Cost of goods sold Gross profit Operating expenses Loss from operations It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since King Cola is only one. of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.
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