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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 $234,000 Cost of goods sold (112,000) Gross profit $122,000 Operating expenses (144,000) Operating loss $(22,000) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected 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). 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 Cola February 29 Continue Discontinue Differential Mango Cola Mango Cola Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: cost of goods sold Variable operating expenses Fixed costs Profit (Loss)

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 $234,000 Cost of goods sold (112,000) Gross profit $122,000 Operating expenses (144,000) Operating loss $(22,000) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected 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). 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 Cola February 29 Continue Discontinue Differential Mango Cola Mango Cola Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: cost of goods sold Variable operating expenses Fixed costs Profit (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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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 $234,000 Cost of goods sold (112,000) Gross profit $122,000 Operating expenses (144,000) Operating loss $(22,000) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Discontinue Differential Mango Cola (Alternative 1) (Alternative 2) (Alternative 2) Mango Cola Effects Revenues 2$ $ Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (Loss)
Transcribed Image Text: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 $234,000 Cost of goods sold (112,000) Gross profit $122,000 Operating expenses (144,000) Operating loss $(22,000) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Discontinue Differential Mango Cola (Alternative 1) (Alternative 2) (Alternative 2) Mango Cola Effects Revenues 2$ $ Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (Loss)
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