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19.Differential Analysis for a Discontinued Product The condensed product-line income statement for Rhinebeck Company for the mo
a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative required, use a

20.
Magnolia Companys Division A has operating income of $83,400 and assets of $398,200. The minimum acceptable return on invest
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Answer #1

19.

Differential Analysis
Continue(Alt 1) or Discontinue (Alt 2) Mufflers
31-Oct
Continue Muffles (Alternative 1 ) Discontinue Muffles (Alternative 2) Differential Effects (Alternative 2)
Revenues $26,600 $0 -$26,600
Costs:
Variable cost of goods sold $13,552 $0 $13,552
Variable selling and admin expenses $9,882 $0 $9,882
Fixed costs $8,166 $8,166 $0
Profit -$5,000 -$8,166 -$3,166

b. Yes

Because, if it is discontiuned, there is a reduction of net income by $3,166

20.

Residual income = Operating income - Minimum required rate of return x Average operating assets

= $83,400 - $398,200 x 13%

= $83,400 - $51,766

= $31,634

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