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Product AG52 has revenues of $195,600, variable cost of goods sold of $114,200, variable selling expenses...

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Accounting

Product AG52 has revenues of $195,600, variable cost of goodssold of $114,200, variable selling expenses of $31,600, and fixedcosts of $58,100, creating a loss from operations of $8,300.

a. Prepare a differential analysis as ofOctober 7 to determine if Product AG52 should be continued(Alternative 1) or discontinued (Alternative 2), assuming fixedcosts are unaffected by the decision. If an amount is zero, enter"0". Use a minus sign to indicate a loss.

Differential Analysis
Continue Product AG52 (Alt. 1) or Discontinue Product AG52(Alt. 2)
October 7
Continue Product AG52 (Alternative 1)Discontinue Product AG52 (Alternative2)Differential Effect on Income (Alternative2)
Revenues$$$
Costs:
Variable cost of goods sold
Variable selling expenses
Fixed costs
Income (Loss)$$$

b. Determine if Product AG52 should becontinued (Alternative 1) or discontinued (Alternative 2).

Answer & Explanation Solved by verified expert
4.3 Ratings (807 Votes)

Answer a.
Differential Analysis
Continue Product AG52 (Alt. 1) or Discontinue Product AG52 (Alt. 2)
October 7
Continue Product AG52 (Alternative 1) Discontinue Product AG52 (Alternative 2) Differential Effect on Income (Alternative 2)
Revenues                               195,600.00                                          -                               (195,600.00)
Costs:
Variable cost of goods sold                               114,200.00                                          -                                 114,200.00
Variable selling expenses                                 31,600.00                                          -                                    31,600.00
Fixed costs                                 58,100.00                           58,100.00                                                 -  
Income (Loss)                                 (8,300.00)                        (58,100.00)                               (49,800.00)
Answer b.
Product AG52 should be continued.
If Discountinued the Loss will be increased by $49,800.

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