A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Sales Cost of goods sold Gross profit Operating expenses Operating loss 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. Because Vim 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 November 2 to determine whether Vim Cola 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) Vim Cola November 2 Line Item Description $236,800 (108,000) $128,800 (142,000) $(13,200) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (loss) Continue Discontinue Differential Effects Vim Cola Vim Cola (Alternative 1) (Alternative 2) (Alternative 2) 236,800 ✔

A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Sales Cost of goods sold Gross profit Operating expenses Operating loss 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. Because Vim 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 November 2 to determine whether Vim Cola 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) Vim Cola November 2 Line Item Description $236,800 (108,000) $128,800 (142,000) $(13,200) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (loss) Continue Discontinue Differential Effects Vim Cola Vim Cola (Alternative 1) (Alternative 2) (Alternative 2) 236,800 ✔

Name: A-2 Differential Analysis for a Discontinued ProductA condensed income
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Description: A-2 Differential Analysis for a Discontinued ProductA condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the pastyear:SalesCost of goods soldGross profitOperating expensesOperating lossIt is

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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