Gilbert Canned Produce (GCP) packs and sells three varieties of canned pr company is currently operating at 82 percent of capacity. Worried about the company's performance, the chief marketing officer is considering dropping the canned sweet peas. If sweet peas are dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent. Segmented income statements appear as follows: Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Green Beans $ 90,500 60,800 $ 29,700 13,380 $ 16,320 Required: a. Prepare a differential cost schedule. b. Should Gilbert Canned Produce drop the sweet pea product line? Sweet Peas $ 134,000 117,400 $ 16,600 21,840 $ (5,240) Tomatoes $ 156,700 122,300 $ 34,400 $ 1,040
Gilbert Canned Produce (GCP) packs and sells three varieties of canned pr company is currently operating at 82 percent of capacity. Worried about the company's performance, the chief marketing officer is considering dropping the canned sweet peas. If sweet peas are dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent. Segmented income statements appear as follows: Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Green Beans $ 90,500 60,800 $ 29,700 13,380 $ 16,320 Required: a. Prepare a differential cost schedule. b. Should Gilbert Canned Produce drop the sweet pea product line? Sweet Peas $ 134,000 117,400 $ 16,600 21,840 $ (5,240) Tomatoes $ 156,700 122,300 $ 34,400 $ 1,040
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if
there is no effect.)
Revenue
Less: Variable costs
Contribution margin
Less: Fixed costs
Operating profit (loss)
Status Quo
Alternative: Drop
Sweet Peas
Difference
Should Gilbert Canned Produce drop the sweet pea product line?
Should Gilbert Canned Produce drop the sweet pea product line?
Transcribed Image Text:ces
Gilbert Canned Produce (GCP) packs and sells three varieties of canned produce: green beans; sweet peas; and tomatoes. The
company is currently operating at 82 percent of capacity. Worried about the company's performance, the chief marketing officer
is considering dropping the canned sweet peas. If sweet peas are dropped, the revenue associated with it would be lost and the
related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent.
Segmented Income statements appear as follows:
Sales
Variable costs
Contribution margin
Fixed costs allocated to each product line
Operating profit (loss)
Green Beans
$ 90,500
60,800
$ 29,700
13,380
$ 16,320
Required:
a. Prepare a differential cost schedule.
b. Should Gilbert Canned Produce drop the sweet pea product line?
Sweet Peas
$ 134,000
117,400
$ 16,600
21,840
$ (5,240)
Tomatoes
$ 156,700
122,300
$ 34,400
33,360
$ 1,040
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