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ondensed income statement by product line for Crown Beverage Inc. indicated the following for Royal Cola for the past year: les $236,500 st of goods sold 109,000 oss profit $127,500 erating expenses 143,000 ss from operations $(15,500) s estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since Royal Cola is only one nany products, the fixed costs will not be materially affected if the product is discontinued. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is o, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Discontinue Royal Continue Royal Cola (Alternative 1) Cola (Alternative 2) on Income (Alternative 2) evenues osts: Variable cost of goods sold Variable operating expenses Fixed costs ncome (Loss)

ondensed income statement by product line for Crown Beverage Inc. indicated the following for Royal Cola for the past year: les $236,500 st of goods sold 109,000 oss profit $127,500 erating expenses 143,000 ss from operations $(15,500) s estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since Royal Cola is only one nany products, the fixed costs will not be materially affected if the product is discontinued. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is o, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Discontinue Royal Continue Royal Cola (Alternative 1) Cola (Alternative 2) on Income (Alternative 2) evenues osts: Variable cost of goods sold Variable operating expenses Fixed costs ncome (Loss)

FINANCIAL ACCOUNTING
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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Complete a and b

a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Continue Royal Discontinue Royal on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues 2$ Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) b. Should Star Cola be retained? Explain. As indicated by the differential analysis in part (A), the income would by $ if the product is discontinued.
Transcribed Image Text:a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Continue Royal Discontinue Royal on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues 2$ Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) b. Should Star Cola be retained? Explain. As indicated by the differential analysis in part (A), the income would by $ if the product is discontinued.
Differential Analysis for a Discontinued Product A condensed income statement by product line for Crown Beverage Inc. indicated the following for Royal Cola for the past year: Sales $236,500 Cost of goods sold 109,000 Gross profit $127,500 Operating expenses 143,000 Loss from operations $(15,500) It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Continue Royal Discontinue Royal on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss)
Transcribed Image Text:Differential Analysis for a Discontinued Product A condensed income statement by product line for Crown Beverage Inc. indicated the following for Royal Cola for the past year: Sales $236,500 Cost of goods sold 109,000 Gross profit $127,500 Operating expenses 143,000 Loss from operations $(15,500) It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Continue Royal Discontinue Royal on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss)
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