Answered

Find the information you're looking for at Westonci.ca, the trusted Q&A platform with a community of knowledgeable experts. Connect with a community of experts ready to provide precise solutions to your questions on our user-friendly Q&A platform. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.

The condensed product-line income statement for Rhinebeck Company for the month of October is as follows:
Rhinebeck Company
Product-Line Income Statement
For the Month Ended October 31
Hats Gloves Mufflers
Sales $71,000 $105,700 $45,000
Cost of goods sold (32,600) (42,300) (27,000)
Gross profit $38,400 $63,400 $18,000
Selling and administrative27400 (42,800) (25000)
expenses
Operating income (loss) $11,000 (20,600) $(7,000) Fixed costs are 20% of the cost of goods sold and 30% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued.
Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2).

Sagot :

abiolataiwo2015

Answer:

Mufflers should be continued (Alternative 1)

Explanation:

Preparation of a differential analysis dated to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2).

DIFFERENTIAL ANALYSIS

Continued (Alternative 1); Discontinued (Alternative 2); Differential effect on income Alternative 2)

October 31

Revenue $45,000 $0 ($45,000)

Costs:

Variable cost of goods sold ($21,600) $0 $21,600

[$27,000*(1-20%)]

Variable selling and administrative expense

($17,500) $0 $17,500

[$25,000*(1-30%)]

Fixed income ($12,900) ($12,900) $0

[($27,000*20%)+($25,000*30%)]

Income(Loss) ($7,000) ($12,900) ($5,900)

Based on the above Differential Analysis MUFFLERS SHOULD BE CONTINUED reason been that the income will decrease by $5,900 if Mufflers discontinued.

Thank you for choosing our service. We're dedicated to providing the best answers for all your questions. Visit us again. We hope you found this helpful. Feel free to come back anytime for more accurate answers and updated information. Thank you for trusting Westonci.ca. Don't forget to revisit us for more accurate and insightful answers.