Diff Analysis & Product Pricing: Differential Analysis for a Discontinued ProductThe condensed product-line income statement for Rhinebeck Company for the month of October is as follows:Rhinebeck CompanyProduct-Line Income StatementFor the Month Ended October 31HatsGlovesMufflersSales$64,800$90,100$26,300Cost of goods sold(26,800)(32,300)(15,700)Gross profit$38,000$57,800$10,600Selling and administrative expenses(29,200)(35,100)(14,900)Operating income (loss)$8,800$22,700$(4,300)Fixed costs are 14% of the cost of goods sold and 43% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line werediscontinued.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 toindicate a loss.Differential AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) MufflersOctober 31ContinueDiscontinueDifferentialMufflersMufflersEffects(Alternative 1) (Alternative 2) (Alternative 2)RevenuesCosts:Variable cost of goods soldVariable selling and admin. expensesFixed costsProfit (Loss)

Differential analysis can help managers make decisions on whether to make or buy products, whether…

Differential Analysis for a Discontinued Product 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 $64,800 $90,100 $26,300 Cost of goods sold (26,800) (32,300) (15,700) Gross profit $38,000 $57,800 $10,600 Selling and administrative expenses (29,200) (35,100) (14,900) Operating income (loss) $8,800 $2,700 $(4,300) Fixed costs are 14% of the cost of goods sold and 43% of the selling and administrative expenses. Rhinebeck Company assumes that fixed discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs

Differential Analysis for a Discontinued Product 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 $64,800 $90,100 $26,300 Cost of goods sold (26,800) (32,300) (15,700) Gross profit $38,000 $57,800 $10,600 Selling and administrative expenses (29,200) (35,100) (14,900) Operating income (loss) $8,800 $2,700 $(4,300) Fixed costs are 14% of the cost of goods sold and 43% of the selling and administrative expenses. Rhinebeck Company assumes that fixed discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers October 31 Continue Discontinue Differential Mufflers Mufflers Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs

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 4E: Differential analysis for a discontinued product The condensed product-line income statement for...

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