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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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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:
Dish N’ Dat Company Product-Line Income Statement
For the Month Ended March 31, 2016
|
|
Bowls |
|
Plates |
|
Cups |
|
|
Sales |
$71,000 |
|
$105,700 |
|
$31,300 |
|
|
Cost of goods sold |
32,600 |
|
42,300 |
|
16,800 |
|
|
Gross profit |
$38,400 |
|
$ 63,400 |
|
$14,500 |
|
|
Selling and administrative expenses |
27,400 |
|
42,800 |
|
16,700 |
|
|
Income from operations |
$11,000 |
|
$ 20,600 |
|
$ (2,200) |
|
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.
Should the Cups line be retained? Explain.
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