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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Differential analysis for a discontinued product
The condensed product-line income statement for Dish N’ Dat Company for the month of March is as follows:
Â
Dish N’ Dat Company Product-Line Income Statement
For the Month Ended March 31, 2016
Â
Â
|
 |
Bowls |
 |
Plates |
 |
Cups |
 |
|
Sales |
$71,000 |
 |
$105,700 |
 |
$31,300 |
 |
|
Cost of goods sold |
  32,600 |
 |
   42,300 |
 |
  16,800 |
 |
|
Gross profit |
$38,400 |
 |
$ Â 63,400 |
 |
$14,500 |
 |
|
Selling and administrative expenses |
  27,400 |
 |
    42,800 |
 |
  16,700 |
 |
|
Income from operations |
$11,000 |
 |
$ Â 20,600 |
 |
$ (2,200) |
 |
Â
Fixed costs are 15% of the cost of goods sold and 40% of the selling and administra- tive expenses. Dish N’ Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued.
a.    Prepare a differential analysis dated March 31, 2016, to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2).
b.                            Â
Should the Cups line be retained? Explain.
Â
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