Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Chapter 25, Problem 25.3EX
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 CB as on January 21.
b)
To determine
To Advise: Whether the production of Product SC should be retained.
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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:
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Operating expenses
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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.
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A condensed income statement by product line for Celestial Beverage Inc. indicated the following for Star Cola for the past year:
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Cost of goods sold
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a. Prepare a differential analysis dated January 21 to determine whether Star Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.
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A condensed income statement by product line for Celestial Beverage Inc. indicated the following for Star Cola for the past year:
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$(49,000)
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Chapter 25 Solutions
Accounting
Ch. 25 - Explain the meaning of (a) differential revenue,...Ch. 25 - A company could sell a building for 250,000 or...Ch. 25 - A chemical company has commodity-grade and...Ch. 25 - A company accepts incremental business at a...Ch. 25 - A company fabricates a component at a cost of...Ch. 25 - Prob. 6DQCh. 25 - In the long run, the normal selling price must be...Ch. 25 - Although the cost-plus approach to product pricing...Ch. 25 - How does the target cost concept differ from...Ch. 25 - Prob. 10DQ
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