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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Discontinue a segment

Product Alpha has revenue of $545,000, variable cost of goods sold of $400,000, variable selling expenses of $65,000, and fixed costs of $90,000, creating a loss from operations of $10,000. Prepare a differential analysis as of December 10 to determine whether Product Alpha should be continued (Alternative 1) or discontinued (Alternative 2), assuming that fixed costs are unaffected by the decision.

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 Determine: Whether to continue or discontinue Product A.

Explanation

There are two alternatives to either continue a product or to discontinue as an operating loss is created...

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