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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 $64,800 $90,100 $26,300 Cost of goods sold (26,800) (32,300) (15,700) Gross profit $38,000 $57,800 $10,600 Selling and administrative expenses (29,200) (35,100) (14,900) Operating income (loss) $8,800 $2,700 $(4,300) Fixed costs are 14% of the cost of goods sold and 43% of the selling and administrative expenses. Rhinebeck Company assumes that fixed discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs

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 $64,800 $90,100 $26,300 Cost of goods sold (26,800) (32,300) (15,700) Gross profit $38,000 $57,800 $10,600 Selling and administrative expenses (29,200) (35,100) (14,900) Operating income (loss) $8,800 $2,700 $(4,300) Fixed costs are 14% of the cost of goods sold and 43% of the selling and administrative expenses. Rhinebeck Company assumes that fixed discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs

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 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 $64,800 $90,100 $26,300 Cost of goods sold (26,800) (32,300) (15,700) Gross profit $38,000 $57,800 $10,600 Selling and administrative expenses (29,200) (35,100) (14,900) Operating income (loss) $8,800 $22,700 $(4,300) Fixed costs are 14% of the cost of goods sold and 43% 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 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss)
Transcribed Image Text: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 $64,800 $90,100 $26,300 Cost of goods sold (26,800) (32,300) (15,700) Gross profit $38,000 $57,800 $10,600 Selling and administrative expenses (29,200) (35,100) (14,900) Operating income (loss) $8,800 $22,700 $(4,300) Fixed costs are 14% of the cost of goods sold and 43% 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 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss)
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