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? Complete this question by entering your answers in the tabs below. Required A Required B Revenue Less: Variable costs Contribution margin Green Beans $ 90,000 60,600 $ 29,400 13,180 $ 16,220 Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Less: Fixed costs Operating profit (loss) Status Quo Sweet Peas $ 132,500 116,400 $ 16,100 21,340 $ (5,240) Alternative: Drop Sweet Peas Tomatoes $ 154,700 121,300 $ 33,400 32,360 $ 1,040 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? Complete this question by entering your answers in the tabs below. Required A Required B Revenue Less: Variable costs Contribution margin Green Beans $ 90,000 60,600 $ 29,400 13,180 $ 16,220 Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Less: Fixed costs Operating profit (loss) Status Quo Sweet Peas $ 132,500 116,400 $ 16,100 21,340 $ (5,240) Alternative: Drop Sweet Peas Tomatoes $ 154,700 121,300 $ 33,400 32,360 $ 1,040 Difference
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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?
Complete this question by entering your answers in the tabs below.
Required A Required B
Revenue
Less: Variable costs
Contribution margin
Green Beans
$ 90,000
60,600
$ 29,400
13,180
$ 16,220
Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if
there is no effect.)
Less: Fixed costs
Operating profit (loss)
Status Quo
Sweet Peas
$ 132,500
116,400
$ 16,100
21,340
$ (5,240)
Alternative: Drop
Sweet Peas
Tomatoes
$ 154,700
121,300
$ 33,400
32,360
$ 1,040
Difference
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