The condensed product-line income statement for Rhinebeck Company for the month of October is as follows: Rhinebeck Company Product-Line Income Statement For the Month Ended October 31   Hats   Gloves   Mufflers Sales $71,000      $105,700      $45,000    Cost of goods sold (32,600)     (42,300)     (27,000)   Gross profit $38,400      $63,400      $18,000    Selling and administrative expenses (27,400)     (42,800)     (25,000)   Operating income (loss) $11,000      $20,600      $(7,000)     Fixed costs are 20% of the cost of goods sold and 30% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued. Question Content Area a.  Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) MufflersOctober 31   Continue Mufflers (Alternative 1) Discontinue Mufflers (Alternative 2) Differential Effects (Alternative 2) Revenues $fill in the blank ee6796063018fae_1 $fill in the blank ee6796063018fae_2 $fill in the blank ee6796063018fae_3 Costs:       Variable cost of goods sold fill in the blank ee6796063018fae_4 fill in the blank ee6796063018fae_5 fill in the blank ee6796063018fae_6 Variable selling and admin. expenses fill in the blank ee6796063018fae_7 fill in the blank ee6796063018fae_8 fill in the blank ee6796063018fae_9 Fixed costs fill in the blank ee6796063018fae_10 fill in the blank ee6796063018fae_11 fill in the blank ee6796063018fae_12 Profit (Loss) $fill in the blank ee6796063018fae_13 $fill in the blank ee6796063018fae_14 $fill in the blank ee6796063018fae_15   Question Content Area b.  Should the Mufflers line be retained?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. The condensed product-line income statement for Rhinebeck Company for the month of October is as follows:

    Rhinebeck Company
    Product-Line Income Statement
    For the Month Ended October 31
      Hats   Gloves   Mufflers
    Sales $71,000      $105,700      $45,000   
    Cost of goods sold (32,600)     (42,300)     (27,000)  
    Gross profit $38,400      $63,400      $18,000   
    Selling and administrative expenses (27,400)     (42,800)     (25,000)  
    Operating income (loss) $11,000      $20,600      $(7,000)  

     

    Fixed costs are 20% of the cost of goods sold and 30% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued.

    Question Content Area

    a.  Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

    Differential AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) MufflersOctober 31
      Continue
    Mufflers
    (Alternative 1)
    Discontinue
    Mufflers
    (Alternative 2)
    Differential
    Effects
    (Alternative 2)
    Revenues $fill in the blank ee6796063018fae_1 $fill in the blank ee6796063018fae_2 $fill in the blank ee6796063018fae_3
    Costs:      
    Variable cost of goods sold fill in the blank ee6796063018fae_4 fill in the blank ee6796063018fae_5 fill in the blank ee6796063018fae_6
    Variable selling and admin. expenses fill in the blank ee6796063018fae_7 fill in the blank ee6796063018fae_8 fill in the blank ee6796063018fae_9
    Fixed costs fill in the blank ee6796063018fae_10 fill in the blank ee6796063018fae_11 fill in the blank ee6796063018fae_12
    Profit (Loss) $fill in the blank ee6796063018fae_13 $fill in the blank ee6796063018fae_14 $fill in the blank ee6796063018fae_15
     

    Question Content Area

    b.  Should the Mufflers line be retained?

     
     
     
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