Differential Analysis for a Discontinued Product 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 25% of the cost of goods sold represents fixed factory overhead costs and that 10% 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 Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs $12,500,000 (10,000,000) $2,500,000 (3,500,000) $(1,000,000) Profit (loss) b. Should vim Cola be retained? Continue Discontinue Differential Vim Cola Vim Cola (Alternative 1) (Alternative 2) (Alternative 2) 100000 Effects

Differential Analysis for a Discontinued Product 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 25% of the cost of goods sold represents fixed factory overhead costs and that 10% 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 Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs $12,500,000 (10,000,000) $2,500,000 (3,500,000) $(1,000,000) Profit (loss) b. Should vim Cola be retained? Continue Discontinue Differential Vim Cola Vim Cola (Alternative 1) (Alternative 2) (Alternative 2) 100000 Effects

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3E: Differential analysis for a discontinued product A condensed income statement by product line for...

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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: Fixed costs are 20% of the cost of goods sold and 30% 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). b. Should the Mufflers line be retained? Explain.
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Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango 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 18% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. $236,700 (108,000) $128,700 (144,000) $(15,300) a. Prepare a differential analysis dated February 29 to determine whether Mango 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) Mango Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (Loss) Cola February 29 Continue…
Diff Analysis & Product Pricing:
A condensed income statement by product line for Warrick Reverage Inc.indicated the following for mango Cola for the past years It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the opening expenses are fixed.because Mango Cola is only one of many products ,fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (alternative 1) or discontinued (alternative 2) b. Should Mango Cola be retained? Explain
Differential Analysis for a Discontinued Product 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 $233,400 (111,000) Gross profit Operating expenses Operating loss $122,400 (143,000) $(20,600) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 18% 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 Line Item Description November 2 Continue Vim Cola Discontinue Vim Cola Differential Effects Revenues Costs: Variable cost of…
Differential Analysis for a Discontinued Product A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Line Item Description Amount Sales $237,700 Cost of goods sold (110,000) Gross profit $127,700 Operating expenses (144,000) Operating loss $(16,300) It is estimated that 15% 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. Question Content Area 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 AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) Vim ColaNovember 2 Line Item Description ContinueVim…
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