Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Chapter 10, Problem 3E
a)
To determine
Differential Analysis: Differential analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business.
To Prepare: The differential analysis of Company HB as on January 5.
b)
To determine
To Advise: Whether the production of Product FCshould be retained.
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Differential Analysis for a Discontinued Product
A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year:
Line Item Description
Amount
Sales
$237,700
Cost of goods sold
(110,000)
Gross profit
$127,700
Operating expenses
(144,000)
Operating loss
$(16,300)
It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Because Vim Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.
Question Content Area
a. Prepare a differential analysis dated November 2 to determine whether Vim Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) Vim ColaNovember 2
Line Item Description
ContinueVim…
Differential Analysis Report for a Discontinued Product
A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year:
Sales
Cost of goods sold
$235,900
(109,000)
Gross profit
$126,900
Operating expenses
(144,000)
Operating loss
$(17,100)
It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed.
Since King Cola is only one of many products, the fixed costs will not be significantly affected if the product is discontinued.
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a. Prepare a differential analysis report for the proposed discontinuance of King Cola.
Crown Beverage Inc.
Proposal to Discontinue King Cola
Differential Analysis Report
Differential revenue from annual sales of King Cola:
Revenue from sales
Differential cost of annual sales of King Cola:
Variable cost of goods sold
Variable operating expenses
?
100
3_E
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Differential Analysis for a Discontinued Product
A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year:
Sales
$15,000,000
Cost of goods sold
(10,800,000)
Gross profit
$4,200,000
Operating expenses
(8,000,000)
Operating loss
$(3,800,000)
It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the operating expenses are fixed. Because Mango 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 February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential Analysis
Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola
February 29
ContinueMango Cola(Alternative 1)
DiscontinueMango…
Chapter 10 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 10 - Explain the meaning of (A) differential revenue,...Ch. 10 - A company could sell a building for 250,000 or...Ch. 10 - A chemical company has a commodity-grade and...Ch. 10 - A company accepts incremental business at a...Ch. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Although the cost-plus approach to product pricing...Ch. 10 - How does the target cost method differ from...Ch. 10 - Prob. 10DQ
Ch. 10 - Prob. 1BECh. 10 - Prob. 2BECh. 10 - Prob. 3BECh. 10 - Replace equipment A machine with a book value of...Ch. 10 - Prob. 5BECh. 10 - Prob. 6BECh. 10 - Prob. 7BECh. 10 - Prob. 8BECh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Differential analysis for machine replacement Kim...Ch. 10 - Sell or process further Calgary Lumber Company...Ch. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Product cost method of product costing Smart...Ch. 10 - Target costing Toyota Motor Corporation (TM) uses...Ch. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - Product decisions under bottlenecked operations...Ch. 10 - Total cost method of product pricing Based on the...Ch. 10 - Variable cost method of product pricing Based on...Ch. 10 - Differential analysis involving opportunity costs...Ch. 10 - Differential analysis for machine replacement...Ch. 10 - Differential analysis for sales promotion proposal...Ch. 10 - Prob. 4PACh. 10 - Product pricing using the cost-plus approach...Ch. 10 - Product pricing and profit analysis with...Ch. 10 - Prob. 1PBCh. 10 - Differential analysis for machine replacement...Ch. 10 - Prob. 3PBCh. 10 - Prob. 4PBCh. 10 - Prob. 5PBCh. 10 - Prob. 6PBCh. 10 - Service yield pricing and differential equations...Ch. 10 - Prob. 2ADMCh. 10 - Prob. 3ADMCh. 10 - Aaron McKinney is a cost accountant for Majik...Ch. 10 - Prob. 3TIF
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