4.Product JO is one of the many products manufactured and sold by Bayside Company. An income statement by product line for the past year indicated a net profit for Product JO of P2,750. This net profit resulted from sales of P275,000, cost of goods sold of P186,500, and operating expenses of P85,750. It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed. If Product JO is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly if Product JO is discontinued. Should the company continue or discontinue producing Product JO? Prepare a differential analysis report to support your answer.

Differential Analysis: It is the report which is prepared to analyze the changes in the revenues,…

Answered: Product JO is one of the many products…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter2: Basic Managerial Accounting Concepts

Section: Chapter Questions

Problem 58P: Cost of Goods Manufactured, Income Statement W. W. Phillips Company produced 4,000 leather recliners...

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Product JO is one of the many products manufactured and sold by Bayside Company. An income statement by product line for the past year indicated a net profit for Product JO of P2,750. This net profit resulted from sales of P275,000, cost of goods sold of P186,500, and operating expenses of P85,750. It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed. If Product JO is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly if Product JO is discontinued.

Should the company continue or discontinue producing Product JO? Prepare a differential analysis report to support your answer.

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