### Learning Objective 1**Product Tango Financial Analysis**Product Tango has reported the following financials:- Total revenue: $1,150,000- Variable cost of goods sold: $850,000- Variable selling and administrative expenses: $275,000- Fixed costs: $125,000- Resulting in an operating loss of: ($100,000)**a. Differential Analysis for February 13**To determine the future of Product Tango, evaluate whether to continue its production (Alternative 1) or discontinue it (Alternative 2), assuming fixed costs remain unchanged regardless of the decision.#### Differential Analysis Table| Metrics | Continue Product Tango (Alternative 1) | Discontinue Product Tango (Alternative 2) | Differential Effects (Alternative 2) ||-------------------------------------|----------------------------------------|-------------------------------------------|--------------------------------------|| **Revenues** | $1,150,000 | $0 | ($1,150,000) || **Variable Cost of Goods Sold** | ($825,000) | | $850,000 || **Variable Selling and Admin Expenses** | ($275,000) | | $275,000 || **Fixed Costs** | ($125,000) | | $0 || **Profit (Loss)** | ($100,000) | | ($25,000) |- **Revenues**: Continuing results in full revenue, discontinuing results in zero revenue, with a differential effect of a $1,150,000 loss.- **Costs**: - **Variable Cost of Goods Sold**: Continuing the product incurs a cost of $825,000, while discontinuing brings a benefit of $850,000. - **Variable Selling and Admin Expenses**: Savings of $275,000 are realized upon discontinuing. - **Fixed Costs**: These remain unaffected at $0 differential effect.- **Profit (Loss)**: Continuing product leads to a $100,000 loss, discontinuing results in a differential loss reduction of $25,000.**b. Recommendation**Product Tango should be **Continued**.This analysis indicates that continuing to produce Product Tango incurs losses, but discontinuing results in a higher loss in the short term due to the lack of revenue. Therefore, it is recommended to continue production for better financial performance given the current conditions.

Requirement:-a Preparation of a differential analysis as of February 13 to determine if Product…

Answered: Product Tango has revenue of…

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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Subject : Accounting
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