Product ) is one of the many products manufactured and sold by Oceanside Company. An income statement by product line for the past year indicated a net profit for Product J off $2,750. This net profit resulted from sales of $275,000, cost of goods sold of $186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed. If Product J is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly if Product ] is discontinued. Prepare a differential analysis report dated February 8 of the current year. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Product J February 8 Line Item Description Costs: Profit (loss) Continue Discontinue Product J Product J (Alternative 1) (Alternative 2) (Alternative 2) Differential Effects Should the company continue or discontinue producing Product J? The company should producing Product ). continue discontinue
Product ) is one of the many products manufactured and sold by Oceanside Company. An income statement by product line for the past year indicated a net profit for Product J off $2,750. This net profit resulted from sales of $275,000, cost of goods sold of $186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed. If Product J is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly if Product ] is discontinued. Prepare a differential analysis report dated February 8 of the current year. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Product J February 8 Line Item Description Costs: Profit (loss) Continue Discontinue Product J Product J (Alternative 1) (Alternative 2) (Alternative 2) Differential Effects Should the company continue or discontinue producing Product J? The company should producing Product ). continue discontinue
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Product ) is one of the many products manufactured and sold by Oceanside Company. An income statement by product line for the past year indicated a net profit for Product J of
$2,750. This net profit resulted from sales of $275,000, cost of goods sold of $186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of goods sold
represents fixed factory overhead costs and that 40% of the operating expense is fixed. If Product J is retained, the revenue, costs, and expenses are not expected to change
significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly
Product J is discontinued.
Prepare a differential analysis report dated February 8 of the current year. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential Analysis
Continue (Alternative 1) or Discontinue (Alternative 2) Product J
February 8
Line Item Description
Costs:
Profit (loss)
Continue
Discontinue
Differential
Product J
Product J
Effects
(Alternative 1) (Alternative 2) (Alternative 2)
Should the company continue or discontinue producing Product J?
The company should (
producing Product J.
continue
discontinue
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