Question

i would really appreciate some help with this differential analysis! any correct answer will definitely recieve a thumbs up! thank you

of Accounting Section 1 20. CengageNOWV2 Online teaching and learning resurrom quired: Chapter 24 Homework & Apf Calculator Print Item Continue/Discontinue WoolCorp Condensed Income Statement For the Year Ended December 31, 2048 Raw Wool Wool Yam $210,000.00 $155,000.00 Rug Yarn Total Company $532,000.00 2 Sales $167,000.00 Cost of goods sold Variable costs $48,000.00 $103,780.00 69,200.00 Fixed costs 32,000.00 518,600.00 12.400.00 $31,000.00 5124000.00 $37180.00 24800.00 $61.980.00 $105,020.00 $80,000.00 $172.980.00 Total cost of goods sold 7 Gross profit $130,000.00 $359,020.00 # Operating expenses: Variable expenses $65,850.00 $5,000.00 89,000.00 $7,750.00 77.500.00 $53,100.00 106,200.00 10 272,700.00 Foed expenses Total operating expenses $94,000.00 585,250.00 $159,300.00 $338,550.00 $20,470.00 12 Income (loss) from operations $36,000.00 $38,750.00 $(54,280.00)

Answer 1

Variable cost varies with number of units thus it is relevant to decision making as same will be incurred only when units are produced and sold otherwise it will not be incurred.

Fixed cost remains constant and will be incurred (unless avoidable) thus irrelevant to decision making

DIFFERENTIAL ANALYSIS CONTINUE RUG YEN (ALTERNATIVE 1) OR DISCONTINUE RUG YEN( ALTERNATIVE 2)] DECEMBER 31 20Y8
	CONTINUE RUG YEN (ALTERNATIVE 1)	DISCONTINUE RUG YEN (ALTERNATIVE 2)	Differential effect on income [2-1]
Revenue	167000	0	-167000
cost
Variable	-90280    [37180+53100]	0	90280
Fixed	-131000   [24800+106200]	-131000	0
Income /(loss)	-54280	-131000	-76720

Since Loss is increased from 54280 to 131000 if Rug Yen had been discontinued ,Therefore Rug yen should not be discontinued.