24-5
Differential Analysis for a Discontinued Product
The condensed product-line income statement for PorcelainTableware Company for the month of December is as follows:
PorcelainTableware Company
Product-Line Income Statement
For the Month Ended December 31, 2014 Bowls Plates Cups Sales $65,900 $90,300 $25,900 Cost of goods sold 25,500 32,000 14,000 Gross profit $40,400 $58,300 $11,900 Selling and administrativeexpenses 29,400 34,100 15,500 Income from operations $11,000 $24,200 $(3,600)
Fixed costs are 12% of the cost of goods sold and 38% of theselling and administrative expenses. Porcelain Tableware assumesthat fixed costs would not be materially affected if the Cups linewere discontinued.
a. Prepare a differential analysis datedDecember 31, 2014, to determine if Cups should be continued(Alternative 1) or discontinued (Alternative 2). If an amount iszero, enter zero "0".
Differential Analysis
Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2)
December 31, 2014
Continue Cups (Alternative 1)
Discontinue Cups (Alternative 2)
Differential Effect on Income (Alternative 2)
Revenues
$
$
$
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)
$
$
$
24-5
Differential Analysis for a Discontinued Product
The condensed product-line income statement for PorcelainTableware Company for the month of December is as follows:
| PorcelainTableware Company Product-Line Income Statement For the Month Ended December 31, 2014 | ||||||||
| Bowls | Plates | Cups | ||||||
| Sales | $65,900 | $90,300 | $25,900 | |||||
| Cost of goods sold | 25,500 | 32,000 | 14,000 | |||||
| Gross profit | $40,400 | $58,300 | $11,900 | |||||
| Selling and administrativeexpenses | 29,400 | 34,100 | 15,500 | |||||
| Income from operations | $11,000 | $24,200 | $(3,600) | |||||
Fixed costs are 12% of the cost of goods sold and 38% of theselling and administrative expenses. Porcelain Tableware assumesthat fixed costs would not be materially affected if the Cups linewere discontinued.
a. Prepare a differential analysis datedDecember 31, 2014, to determine if Cups should be continued(Alternative 1) or discontinued (Alternative 2). If an amount iszero, enter zero "0".
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Related questions
The condensed product-line income statement for Dish Nâ DatCompany for the month of March is as follows:
Dish Nâ Dat Company |
Product-Line Income Statement |
For the Month Ended March 31, 2016 |
1 | Bowls | Plates | Cups | |
2 | Sales | $70,960.00 | $105,450.00 | $31,760.00 |
3 | Cost of goods sold | 32,990.00 | 42,680.00 | 16,710.00 |
4 | Gross profit | $37,970.00 | $62,770.00 | $15,050.00 |
5 | Selling and administrative expenses | 27,350.00 | 42,530.00 | 16,670.00 |
6 | Income from operations | $10,620.00 | $20,240.00 | $(1,620.00) |
Fixed costs are 30% of the cost of goods sold and 50% of theselling and administrative expenses. Dish Nâ Dat assumes that fixedcosts would not be materially affected if the Cups line werediscontinued.
| Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A. | Prepare a differential analysisdated March 31, 2016, to determine if Cups should be continued(Alternative 1) or discontinued (Alternative 2). Refer to the listsof Labels and Amount Descriptions for the exact wording of theanswer choices for text entries. For those boxes in which you mustenter subtracted or negative numbers use a minus sign. If there isno amount or an amount is zero, enter "0". A colon (:) willautomatically appear if required. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B. | Should the Cups line be retained? Explain
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