Differential Analysis for a Discontinued ProductA condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year:SalesCost of goods sold$233,400(111,000)Gross profitOperating expensesOperating 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 materiallyaffected 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 AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) Vim ColaLine Item DescriptionNovember 2ContinueVim ColaDiscontinueVim ColaDifferentialEffectsRevenuesCosts:Variable cost of goods soldVariable operating expensesFixed costsProfit (loss)(Alternative 1) (Alternative 2) (Alternative 2)$

The objective of the question is to prepare a differential analysis to determine whether Vim Cola…

Answered: Differential Analysis for a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sierra Company incurs the following costs to produce and sell its only product. Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative expenses Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses 10 9. %24 24 $87,750 $ 315,000 During this year, 29,250 units were produced and 25,250 units were sold. The Finished Goods inventory account at the end of this year shows a balance of $84,000 for the 4,000 unsold units. Required: 1-a. Calculate this year's ending balance in Finished Goods inventory two ways-using variable costing and using absorption costing. 1-b. Does it appear that the company is using variable costing or absorption costing to assign costs to the 4,000 units in its Finished Goods inventory? 2. Assume that the company wishes to prepare this year's financial statements for its stockholders. a. Is Finished Goods inventory of $84,000 the correct amount to include on the…
A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: Sales $235,100 Cost of goods sold 112,000 Gross profit $123,100 Operating expenses 145,000 Loss from operations $(21,900) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since King 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 March 3, to determine whether to Continue King Cola (Alternative 1) or Discontinue King Cola (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisContinue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2)March 3 Continue KingCola (Alternative 1) Discontinue KingCola (Alternative 2) Differential…
Determine the amount of sales (units) that would be necessary under Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 101,250 units at a price of $84 per unit during the current year. Its income statement for the current year is as follows: Sales $8,505,000 Cost of goods sold 4,200,000 Gross profit $4,305,000 Expenses: Selling expenses $2,100,000 Administrative expenses 2,100,000 Total expenses 4,200,000 Income from operations $105,000 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program that will permit an increase of $672,000 in yearly sales. The expansion will increase fixed costs by $67,200, but will not affect the relationship between sales and variable costs. Required: 1. Determine the…
Cold One Brewing Company reported the following operating information for a recent year (in millions): Sales $6,608 Cost of goods sold (1,652) Gross profit $4,956 Marketing, general, and admin. expenses (708) Income from operations $ 4,248 Assume that Cold One sold 59 million barrels of beer during the year, variable costs were 75% of the cost of goods sold and 50% of marketing, general, and administrative expenses, and that the remaining costs are fixed. For the following year, assume that Cold One expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $23.01 million. a. Compute the break-even sales (barrels) for the current year. Round your answer to two decimal places. Enter your answers in millions.fill in the blank 1 million barrels b. Compute the anticipated break-even sales (barrels) for the following year. Round your answer to two decimal…
A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $233,300 Cost of goods sold 111,000 Gross profit $122,300 Operating expenses 145,000 Loss from operations $(22,700) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since Royal 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 March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue RoyalCola (Alternative 1) Discontinue RoyalCola (Alternative 2) Differential Effecton Income(Alternative 2)…
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…
AJ Manufacturing Company Incurred $55,500 of fixed product cost and $44,400 of variable product cost during its first year of operation. Also during its first year, AJ incurred $17.650 of fixed and $14.100 of variable selling and administrative costs. The company sold all of the units it produced for $182.000. Required a. Prepare an income statement using the format required by generally accepted accounting Principles (GAAP) b. Prepare an income statement using the contribution margin approach. Complete this question by entering your answers in the tabs below. Required A Required B Prepare an income statement using the format required by generally accepted accounting Principles (GAAP). AJ MANUFACTURING COMPANY Income Statement
Product ) is one of the many products manufactured and sold by Oceanside Company. An income statement by product line for the past year indicated a net profit for Product J of $2,750. This net profit resulted from sales of $275,000, cost of goods sold of $186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed. If Product J is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly Product J is discontinued. Prepare a differential analysis report dated February 8 of the current year. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Product J February 8 Line Item…
Differential Analysis for a Discontinued Product A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $233,800 Cost of goods sold 110,000 Gross profit $123,800 Operating expenses 143,000 Loss from operations $(19,200) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 20% of the operating expenses are fixed. Since Royal 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 March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Continue Royal Discontinue Royal on Income (Alternative 2) Cola (Alternative 1) Cola…
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 $15,000,000 Cost of goods sold (10,800,000) Gross profit $4,200,000 Operating expenses (8,000,000) >) Operating loss $(3,800,000) It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% 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 Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Discontinue Differential Mango Cola Effects Mango Cola (Alternative 1) (Alternative…
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (42,000 units x $43.60 per unit) Cost of goods sold (42,000 units x $23 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,831, 200 966,000 865,200 483,000 $ 382,200 The company's selling and administrative expenses consist of $315,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 unit product cost given above is computed as follows: Direct materials. Direct labor $ 10 4 Variable manufacturing overhead 3 Fixed manufacturing overhead ($276,000 46,000 units) 6 Absorption costing unit product cost $ 23 Required: 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption…
AJ Manufacturing Company incurred $50,500 of fixed product cost and $40.400 of variable product cost during its first year of operation. Also during its first year, AJ incurred $16,150 of fixed and $13,100 of variable selling and administrative costs. The company sold all of the units it produced for $162,000. Required a. Prepare an income statement using the format required by generally accepted accounting Principles (GAAP). b. Prepare an income statement using the contribution margin approach. Complete this question by entering your answers in the tabs below. Required A Required B Prepare an income statement using the format required by generally accepted accounting Principles (GAAP). AJ MANUFACTURING COMPANY Income Statement Required B > Mc Graw Hill

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