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 | $232,600 |
Cost of goods sold | (108,000) |
Gross profit | $124,600 |
Operating expenses | (142,000) |
Operating loss | $(17,400) |
It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 21% 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 | |||
Continue Mango Cola (Alternative 1) |
Discontinue Mango Cola (Alternative 2) |
Differential Effects (Alternative 2) |
|
Revenues | $ | $ | $ |
Costs: | |||
Variable cost of goods sold | |||
Variable operating expenses | |||
Fixed costs | |||
Profit (Loss) | $ | $ | $ |
b. Should Mango Cola be retained?
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 | |||
Continue Mango Cola (Alternative 1) |
Discontinue Mango Cola (Alternative 2) |
Differential Effects (Alternative 2) |
|
Revenues | $232600 | $ | -232600 |
Costs: | |||
Variable cost of goods sold | -90720 | 0 | 90720 |
Variable operating expenses | -112180 | 0 | 112180 |
Fixed costs | -47100 | -47100 | 0 |
Profit (Loss) | -17400 | -47100 | -29700 |
Yes mango cola should be retained
Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage...
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...
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 $236,700 Cost of goods sold (109,000) Gross profit $127,700 Operating expenses (142,000) Operating loss $(14,300) 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 Mango Cola is only one of many products, the fixed costs...
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 $236,800 Cost of goods sold (109,000) Gross profit $127,800 Operating expenses (144,000) Operating loss $(16,200) It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 21% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs...
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 $236,900 Cost of goods sold (110,000) Gross profit $126,900 Operating expenses (146,000) Operating loss $(19,100) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 21% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs...
Differential Analysis for a Discontinued Product A condensed Income statement by product line for Healthy Beverage Inc, indicated the following for Fruit Cola for the past year Sales $232,400 Cost of goods sold 110,000 $122,400 Gross profit Operating expenses 143,000 Loss from operations $(20,600) It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed...
Differential Analysis for a Discontinued Product A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales $236,900 112,000 Cost of goods sold Gross profit $124,900 Operating expenses 142,000 $(17,100) Loss from operations It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 22% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed...
Differential Analysis for a Discontinued Product A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: $237,800 Sales Cost of goods sold 108,000 Gross profit $129,800 Operating expenses 143,000 Loss from operations $(13,200) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 20% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed...
Differential Analysis for a Discontinued Product A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales $236,000 Cost of goods sold 108,000 Gross profit $128,000 Operating expenses 146,000 Loss from operations $(18,000) 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 Fruit Cola is only one of many products, the fixed...
Differential Analysis for a Discontinued Product A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales $233,800 Cost of goods sold 109,000 Gross profit $124,800 Operating expenses 146,000 Loss from operations $(21,200) It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed...
Differential Analysis for a Discontinued Product A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales Cost of goods sold Gross profit $235,200 111,000 Operating expenses $124,200 144,000 $(19,800) Loss from operations It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed...