Differential Analysis for a Discontinued Product The condensed product-line income statement for Suffolk China Ware Company for the month of May is as follows: Suffolk China Ware Company Product-Line Income Statement For the Month Ended May 31 Sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations. Fixed costs are 12% of the cost of goods sold and 44% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Income (Loss) Bowls Plates Cups $65,900 $89,900 $27,900 27,200 33,600 15,100 $38,700 $56,300 $12,800 30,200 34,800 14,400 $8,500 $21,500 $(1,600) Feedback Check My Work Differential Analysis Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) For the Month Ended May 31 Continue Cups Discontinue Cups (Alternative 1) (Alternative 2) b. Should the Cups line be retained? Explain. Yes Differential Effect on Income (Alternative 2) For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. As indicated by the differential analysis in part (a), the income will decrease 10000 ✓by $ if the Cups line is discontinued.
Differential Analysis for a Discontinued Product The condensed product-line income statement for Suffolk China Ware Company for the month of May is as follows: Suffolk China Ware Company Product-Line Income Statement For the Month Ended May 31 Sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations. Fixed costs are 12% of the cost of goods sold and 44% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Income (Loss) Bowls Plates Cups $65,900 $89,900 $27,900 27,200 33,600 15,100 $38,700 $56,300 $12,800 30,200 34,800 14,400 $8,500 $21,500 $(1,600) Feedback Check My Work Differential Analysis Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) For the Month Ended May 31 Continue Cups Discontinue Cups (Alternative 1) (Alternative 2) b. Should the Cups line be retained? Explain. Yes Differential Effect on Income (Alternative 2) For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. As indicated by the differential analysis in part (a), the income will decrease 10000 ✓by $ if the Cups line is discontinued.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please do not give solution in image format thanku
Transcribed Image Text:Differential Analysis for a Discontinued Product
The condensed product-line income statement for Suffolk China Ware Company for the month of May is as follows:
Suffolk China Ware Company
Product-Line Income Statement
For the Month Ended May 31
Cups
Sales
$65,900 $89,900
$27,900
Cost of goods sold
27,200
33,600
15,100
Gross profit
$38,700 $56,300 $12,800
Selling and administrative expenses
30,200
14,400
34,800
$8,500 $21,500 $(1,600)
Income from operations
Fixed costs are 12% of the cost of goods sold and 44% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.
Revenues
Costs:
a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative
numbers use a minus sign.
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)
Bowls
Feedback
Plates
Differential Analysis
Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2)
For the Month Ended May 31
Continue Cups Discontinue Cups
(Alternative 1) (Alternative 2)
b. Should the Cups line be retained? Explain.
Yes
Check My Work
For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by
subtracting alternative 1 from alternative 2.
Differential Effect
on Income
(Alternative 2)
As indicated by the differential analysis in part (a), the income will decrease
by $
if the Cups line is discontinued.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education