Calculator Print Item 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 $65,000 $90,100 $27,000 Cost of goods sold (26,900) (32,300) (14,300) Gross profit $38,100 $57,800 $12,700 Selling and administrative expenses (29,200) (34,400) (15,300) Operating income (loss) $8,900 $23,400 $(2,600) Fixed costs are 12% of the cost of goods sold and 45% 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. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Discontinue Mufflers (Alternative 1) (Alternative 2) (Alternative 2) Differential Effects Continue Mufflers 27,000 s -27,000 Revenues. Costs: -12,584 12,584 Variable cost of goods sold 8.415 -8,415 Variable selling and admin. expenses -8,601 118.601. Fixed costs $39,398 x s -8,601 9 24 -47,999 Profit (Loss) gation colua olete table Feenhark
Calculator Print Item 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 $65,000 $90,100 $27,000 Cost of goods sold (26,900) (32,300) (14,300) Gross profit $38,100 $57,800 $12,700 Selling and administrative expenses (29,200) (34,400) (15,300) Operating income (loss) $8,900 $23,400 $(2,600) Fixed costs are 12% of the cost of goods sold and 45% 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. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Discontinue Mufflers (Alternative 1) (Alternative 2) (Alternative 2) Differential Effects Continue Mufflers 27,000 s -27,000 Revenues. Costs: -12,584 12,584 Variable cost of goods sold 8.415 -8,415 Variable selling and admin. expenses -8,601 118.601. Fixed costs $39,398 x s -8,601 9 24 -47,999 Profit (Loss) gation colua olete table Feenhark
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
$65,000
$90,100
$27,000
Cost of goods sold
(26,900)
(32,300)
(14,300)
Gross profit
$38,100
$57,800
$12,700
Selling and administrative expenses
(29,200)
(34,400)
(15,300)
Operating income (loss)
$8,900
$23,400
$(2,600)
Fixed costs are 12% of the cost of goods sold and 45% 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.
Differential Analysis
Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers
October 31
Discontinue
Mufflers
(Alternative 1) (Alternative 2) (Alternative 2)
Differential
Effects
Continue
Mufflers
27,000 s
-27,000
Revenues.
Costs:
-12,584
12,584
Variable cost of goods sold
8.415
-8,415
Variable selling and admin. expenses
-8,601
118.601.
Fixed costs
$39,398 x s
-8,601 9
24
-47,999
Profit (Loss)
gation colua
olete table
Feenhark
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