Differential Analysis for a Discontinued ProductA condensed income statement by product line forWarrick Beverage Inc. indicated the following for MangoCola for the past year:SalesCost of goods soldGross profitOperating expensesOperating lossIt is estimated that 14% of the cost of goods soldrepresents fixed factory overhead costs and that 18% ofthe operating expenses are fixed. Because Mango Cola isonly one of many products, the fixed costs will not bematerially affected if the product is discontinued.$236,700(108,000)$128,700(144,000)$(15,300)a. Prepare a differential analysis dated February 29 todetermine whether Mango Cola should be continued(Alternative 1) or discontinued (Alternative 2). If anamount is zero, enter "0". If required, use a minus signto indicate a loss.Differential AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) MangoRevenuesCosts:Variable cost of goods soldVariable operating expensesFixed costsProfit (Loss)ColaFebruary 29ContinueDiscontinueDifferentialMango Cola Mango ColaEffects(Alternative 1) (Alternative 2) (Alternative 2)b. Should Mango Cola be retained?

Differential analysis is a decision-making technique that examines the benefits and costs associated…

Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales Cost of goods sold Gross profit Operating expenses Operating loss $236,700 (108,000) $128,700 (144,000) $(15,300) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales Cost of goods sold Gross profit Operating expenses Operating loss $236,700 (108,000) $128,700 (144,000) $(15,300) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3E: Differential analysis for a discontinued product A condensed income statement by product line for...

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