Differential Analysis for a Discontinued Product A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Sales $234,600 Cost of goods sold (111,000) Gross profit $123,600 (144,000) $(20,400) Operating expenses Operating loss It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Because Vim 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 November 2 to determine whether Viem 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 Continue (Alt. 1) or Discontinue (Alt. 2) Vim Colo November 2 Line Item Description Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (loss) Continue Discontinue Differential Effects Vim Cola Vim Cola (Alternative 1) (Alternative 2) (Alternative 2) b. Should Vim Cola be retained? 0000 0000

Differential Analysis for a Discontinued Product A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Sales $234,600 Cost of goods sold (111,000) Gross profit $123,600 (144,000) $(20,400) Operating expenses Operating loss It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Because Vim 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 November 2 to determine whether Viem 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 Continue (Alt. 1) or Discontinue (Alt. 2) Vim Colo November 2 Line Item Description Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (loss) Continue Discontinue Differential Effects Vim Cola Vim Cola (Alternative 1) (Alternative 2) (Alternative 2) b. Should Vim Cola be retained? 0000 0000

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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Differential Analysis for a Discontinued Product A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Sales Cost of goods sold $233,400 (111,000) Gross profit Operating expenses Operating loss $122,400 (143,000) $(20,600) 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 Vim 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 November 2 to determine whether Vim 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 Continue (Alt. 1) or Discontinue (Alt. 2) Vim Cola Line Item Description November 2 Continue Vim Cola Discontinue Vim Cola Differential Effects Revenues Costs: Variable cost of…
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Differential Analysis for a Discontinued Product A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Line Item Description Amount Sales $237,700 Cost of goods sold (110,000) Gross profit $127,700 Operating expenses (144,000) Operating loss $(16,300) It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Because Vim Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. Question Content Area a. Prepare a differential analysis dated November 2 to determine whether Vim 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 AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) Vim ColaNovember 2 Line Item Description ContinueVim…
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