Differential Analysis for a Discontinued ProductA condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year:Sales$232,000Cost of goods sold112,000Gross profit$120,000Operating expenses146,000Loss from operations$(26,000)It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.a. Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss.Differential AnalysisContinue Fruit Cola (Alt. 1) or Discontinue Fruit Cola (Alt. 2)January 5 Continue Fruit Cola (Alternative 1)Discontinue Fruit Cola (Alternative 2)Differential Effect on Income (Alternative 2)Revenues$fill in the blank 2e64dafb8030f96_1$fill in the blank 2e64dafb8030f96_2$fill in the blank 2e64dafb8030f96_3Costs: Variable cost of goods soldfill in the blank 2e64dafb8030f96_4fill in the blank 2e64dafb8030f96_5fill in the blank 2e64dafb8030f96_6Variable operating expensesfill in the blank 2e64dafb8030f96_7fill in the blank 2e64dafb8030f96_8fill in the blank 2e64dafb8030f96_9Fixed costsfill in the blank 2e64dafb8030f96_10fill in the blank 2e64dafb8030f96_11fill in the blank 2e64dafb8030f96_12Income (Loss)$fill in the blank 2e64dafb8030f96_13$fill in the blank 2e64dafb8030f96_14$fill in the blank 2e64dafb8030f96_15b. Should Fruit Cola be retained?

Differential analysis It involves analyzing different costs and benefits which occurred from…

Answered: a. Prepare a differential analysis…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3E: Differential analysis for a discontinued product A condensed income statement by product line for...

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Differential Analysis for a Discontinued Product

A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year:

Sales	$232,000
Cost of goods sold	112,000
Gross profit	$120,000
Operating expenses	146,000
Loss from operations	$(26,000)

It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

a. Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss.

Differential Analysis
Continue Fruit Cola (Alt. 1) or Discontinue Fruit Cola (Alt. 2)
January 5
	Continue Fruit Cola (Alternative 1)	Discontinue Fruit Cola (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank 2e64dafb8030f96_1	$fill in the blank 2e64dafb8030f96_2	$fill in the blank 2e64dafb8030f96_3
Costs:
Variable cost of goods sold	fill in the blank 2e64dafb8030f96_4	fill in the blank 2e64dafb8030f96_5	fill in the blank 2e64dafb8030f96_6
Variable operating expenses	fill in the blank 2e64dafb8030f96_7	fill in the blank 2e64dafb8030f96_8	fill in the blank 2e64dafb8030f96_9
Fixed costs	fill in the blank 2e64dafb8030f96_10	fill in the blank 2e64dafb8030f96_11	fill in the blank 2e64dafb8030f96_12
Income (Loss)	$fill in the blank 2e64dafb8030f96_13	$fill in the blank 2e64dafb8030f96_14	$fill in the blank 2e64dafb8030f96_15

b. Should Fruit Cola be retained?

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