Question

The condensed product- line income statement for Dish N’ Dat Company for the month of March is as follows:

Differential analysis for a discontinued product Final Question Differential Analysis Instructions Labels and Amount Descriptions Instructions The condensed product-line inoome statement for Dish N' Dat Company for the month of March is as follows: Dish N' Dat Company Product-Line Income Statement For the Month Ended March 31, 2016 Cups Plates Bowls 1 $105,450.00 $31,080.00 $71,450.00 2 Sales 32,370 00 42,660.00 17150.00 Cost of goods sold $62,790.00 $13,950.00 4Gross profit $39,080.00 42,750.00 16,200.00 27590.00 s Selling and administrative expenses $20,06000 $2,270.00 $11,490.00 6 Income from operations Fixed costs are 10 % of the cost of goods sold and 30 % of the selling and administrative expenses. Dish N Dat assumes that fixed costs would not be materialy affected discontinued Required: Prepare a differential analysis dated March 31, 2016 to determine if Cups should be continued (Alternative 1) or discontinued (A/ternative 2) A

Answer 1

	Continue Cups (Alternative 1)	Discontinue Cups (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	31080	0	-31080
Costs:
Variable cost of goods sold	-15435	0	15435
Variable selling and admin. expenses	-11340	0	11340
Fixed costs	-6575	-6575	0
Income (Loss)	-2270	-6575	-4305
Workings:
Variable cost of goods sold	=17150*(1-10%)
Variable selling and admin. expenses	=16200*(1-30%)
Fixed costs	=(17150*10%)+(16200*30%)