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) Required: a. Prepare a differential cost schedule. b. Should Gilbert Canned Produce drop the sweet pea product line? Green Beans $ 87,000 59,400 Complete this question by entering your answers in the tabs below. Revenue Less: Variable costs Contribution marain $ 27,600 11,980 $ 15,620 Status Quo Required A Required B Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop Sweet Peas Sweet Peas $ 123,500 110,400 $ 13,100 18,340 $ (5,240) Tomatoes $ 143,200 115,300 $ 27,900 26,360 $ 1,540 Difference
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) Required: a. Prepare a differential cost schedule. b. Should Gilbert Canned Produce drop the sweet pea product line? Green Beans $ 87,000 59,400 Complete this question by entering your answers in the tabs below. Revenue Less: Variable costs Contribution marain $ 27,600 11,980 $ 15,620 Status Quo Required A Required B Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop Sweet Peas Sweet Peas $ 123,500 110,400 $ 13,100 18,340 $ (5,240) Tomatoes $ 143,200 115,300 $ 27,900 26,360 $ 1,540 Difference
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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h2
Transcribed Image Text: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)
Required:
a. Prepare a differential cost schedule.
b. Should Gilbert Canned Produce drop the sweet pea product line?
Green Beans
$ 87,000
59,400
Complete this question by entering your answers in the tabs below.
Revenue
Less: Variable costs
Contribution marain
$ 27,600
11,980
$ 15,620
Status Quo
Required A Required B
Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if
there is no effect.)
Alternative: Drop
Sweet Peas
Sweet Peas
$ 123,500
110,400
$ 13,100
18,340
$ (5,240)
Tomatoes
$ 143,200
115,300
$ 27,900
26,360
$ 1,540
Difference
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