Discontinuance of Product Line: The Decision on discontinuing the product line is an important decision taken on the basis of net differential effect on revenue and cost of the product discontinued on the overall the financial income of the company. Therefore, for such analysis, the revenue lost is taken in to account and is compared with the savings in cost taken for discontinuance. However, while considering the savings in cost, only relevant cost shall be taken in to account like variable cost or avoidable fixed cost. The fixed cost incurred on the product line through allocation of general admin overheads , depreciation on fixed asset, shall be treated as irrelevant as these will not have any effect with the change in decision. Requirement1: The Differential analysis of discontinuance of product line shall be done.

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Chapter 26, Problem 2CP

To determine

Discontinuance of Product Line:

The Decision on discontinuing the product line is an important decision taken on the basis of net differential effect on revenue and cost of the product discontinued on the overall the financial income of the company.

Therefore, for such analysis, the revenue lost is taken in to account and is compared with the savings in cost taken for discontinuance. However, while considering the savings in cost, only relevant cost shall be taken in to account like variable cost or avoidable fixed cost. The fixed cost incurred on the product line through allocation of general admin overheads, depreciation on fixed asset, shall be treated as irrelevant as these will not have any effect with the change in decision.

Requirement1:

The Differential analysis of discontinuance of product line shall be done.

To determine

Requirement 2:

TheRecommendation on discontinuance of Product T205.

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