Differential Analysis for a Discontinued Product The condensed product-line income statement for Dish N’ Dat Company for the month of May is as follows: Dish N' Dat Company Product-Line Income Statement For the Month Ended May 31 Bowls Plates Cups Sales $71,000 $105,700 $33,500 Cost of goods sold 32,600 42,300 20,600 Gross profit $38,400 $63,400 $12,900 Selling and administrative expenses 27,400 42,800 17,200 Income from operations $11,000 $20,600 $(4,300) Fixed costs are 15% of the cost of goods sold and 30% of the selling and administrative expenses. Dish N' Dat 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. Differential Analysis Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) For the Month Ended May 31 Continue Cups (Alternative 1) Discontinue Cups (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $fill in the blank 0bead3f0e07b078_1 $fill in the blank 0bead3f0e07b078_2 $fill in the blank 0bead3f0e07b078_3 Costs: Variable cost of goods sold fill in the blank 0bead3f0e07b078_4 fill in the blank 0bead3f0e07b078_5 fill in the blank 0bead3f0e07b078_6 Variable selling and admin. expenses fill in the blank 0bead3f0e07b078_7 fill in the blank 0bead3f0e07b078_8 fill in the blank 0bead3f0e07b078_9 Fixed costs fill in the blank 0bead3f0e07b078_10 fill in the blank 0bead3f0e07b078_11 fill in the blank 0bead3f0e07b078_12 Income (Loss) $fill in the blank 0bead3f0e07b078_13 $fill in the blank 0bead3f0e07b078_14 $fill in the blank 0bead3f0e07b078_15 b. Should the Cups line be retained? Explain. As indicated by the differential analysis in part (a), the income will by $fill in the blank de2fb702f017040_3 if the Cups line is discontinued.

Differential Analysis for a Discontinued Product The condensed product-line income statement for Dish N’ Dat Company for the month of May is as follows: Dish N' Dat Company Product-Line Income Statement For the Month Ended May 31 Bowls Plates Cups Sales $71,000 $105,700 $33,500 Cost of goods sold 32,600 42,300 20,600 Gross profit $38,400 $63,400 $12,900 Selling and administrative expenses 27,400 42,800 17,200 Income from operations $11,000 $20,600 $(4,300) Fixed costs are 15% of the cost of goods sold and 30% of the selling and administrative expenses. Dish N' Dat 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. Differential Analysis Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) For the Month Ended May 31 Continue Cups (Alternative 1) Discontinue Cups (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $fill in the blank 0bead3f0e07b078_1 $fill in the blank 0bead3f0e07b078_2 $fill in the blank 0bead3f0e07b078_3 Costs: Variable cost of goods sold fill in the blank 0bead3f0e07b078_4 fill in the blank 0bead3f0e07b078_5 fill in the blank 0bead3f0e07b078_6 Variable selling and admin. expenses fill in the blank 0bead3f0e07b078_7 fill in the blank 0bead3f0e07b078_8 fill in the blank 0bead3f0e07b078_9 Fixed costs fill in the blank 0bead3f0e07b078_10 fill in the blank 0bead3f0e07b078_11 fill in the blank 0bead3f0e07b078_12 Income (Loss) $fill in the blank 0bead3f0e07b078_13 $fill in the blank 0bead3f0e07b078_14 $fill in the blank 0bead3f0e07b078_15 b. Should the Cups line be retained? Explain. As indicated by the differential analysis in part (a), the income will by $fill in the blank de2fb702f017040_3 if the Cups line is discontinued.

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 Dish N’ Dat Company for the month of May is as follows:

Dish N' Dat Company Product-Line Income Statement For the Month Ended May 31
	Bowls	Plates		Cups
Sales	$71,000		$105,700		$33,500
Cost of goods sold	32,600		42,300		20,600
Gross profit	$38,400		$63,400		$12,900
Selling and administrative expenses	27,400		42,800		17,200
Income from operations	$11,000		$20,600		$(4,300)

Fixed costs are 15% of the cost of goods sold and 30% of the selling and administrative expenses. Dish N' Dat 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.

Differential Analysis
Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2)
For the Month Ended May 31
	Continue Cups (Alternative 1)	Discontinue Cups (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank 0bead3f0e07b078_1	$fill in the blank 0bead3f0e07b078_2	$fill in the blank 0bead3f0e07b078_3
Costs:
Variable cost of goods sold	fill in the blank 0bead3f0e07b078_4	fill in the blank 0bead3f0e07b078_5	fill in the blank 0bead3f0e07b078_6
Variable selling and admin. expenses	fill in the blank 0bead3f0e07b078_7	fill in the blank 0bead3f0e07b078_8	fill in the blank 0bead3f0e07b078_9
Fixed costs	fill in the blank 0bead3f0e07b078_10	fill in the blank 0bead3f0e07b078_11	fill in the blank 0bead3f0e07b078_12
Income (Loss)	$fill in the blank 0bead3f0e07b078_13	$fill in the blank 0bead3f0e07b078_14	$fill in the blank 0bead3f0e07b078_15

b. Should the Cups line be retained? Explain.

As indicated by the differential analysis in part (a), the income will by $fill in the blank de2fb702f017040_3 if the Cups line is discontinued.

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