Differential Analysis for a Discontinued Product The condensed product-line income statement for Northern Lights Company for the month of August is as follows: Northern Lights Company Product-Line Income Statement For the Month Ended August 31 Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income (loss) Line Item Description Revenues Costs: Fixed costs are 12% of the cost of goods sold and 42% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were discontinued. Hats $65,300 (25,700) $39,600 (30,100) $9,500 a. Prepare a differential analysis dated August 31 to determine if Socks 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. Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Socks August 31 Gloves $90,400 (33,800) $56,600 (35,300) $21,300 Continue Socks 100000 10 0000 100000 Discontinue Differential Socks Socks $27,400 (15,000) $12,400 Effects (15,100) $(2,700) (Alternative 1) (Alternative 2) (Alternative 2)
Differential Analysis for a Discontinued Product The condensed product-line income statement for Northern Lights Company for the month of August is as follows: Northern Lights Company Product-Line Income Statement For the Month Ended August 31 Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income (loss) Line Item Description Revenues Costs: Fixed costs are 12% of the cost of goods sold and 42% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were discontinued. Hats $65,300 (25,700) $39,600 (30,100) $9,500 a. Prepare a differential analysis dated August 31 to determine if Socks 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. Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Socks August 31 Gloves $90,400 (33,800) $56,600 (35,300) $21,300 Continue Socks 100000 10 0000 100000 Discontinue Differential Socks Socks $27,400 (15,000) $12,400 Effects (15,100) $(2,700) (Alternative 1) (Alternative 2) (Alternative 2)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Homework help. Chapter 25, number 4. Need help filling in the blanks. Thank you!
Transcribed Image Text:Differential Analysis for a Discontinued Product
The condensed product-line income statement for Northern Lights Company for the month of August is as follows:
Northern Lights Company
Product-Line Income Statement
For the Month Ended August 31
Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Operating income (loss)
Line Item Description
Revenues
Costs:
Hats
$65,300
(25,700)
Fixed costs are 12% of the cost of goods sold and 42% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were
discontinued.
$39,600
(30,100)
$9,500
a. Prepare a differential analysis dated August 31 to determine if Socks 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.
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Profit (Loss)
Differential Analysis
Continue (Alt. 1) or Discontinue (Alt. 2) Socks
August 31
Gloves
$90,400
(33,800)
$56,600
(35,300)
$21,300
Continue
Socks
100000
40 0000
11100000
Discontinue
Socks
Differential
Socks
$27,400
(15,000)
$12,400
(15,100)
$(2,700)
Effects
(Alternative 1) (Alternative 2) (Alternative 2)
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