Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 11, Problem 3E
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:
It is estimated that 30% of the cost of goods sold represents fixed
- a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2).
- b. Should Mango Cola be retained? Explain.
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A condensed income statement by product line for Warrick Reverage Inc.indicated the following for mango Cola for the past years
It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the opening expenses are fixed.because Mango Cola is only one of many products ,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)
b. Should Mango Cola be retained? Explain
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
Gross profit
Operating expenses
Operating loss
It is estimated that 25% of the cost of goods sold represents fixed factory overhead costs and that 10% 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
November 2
Line Item Description
Revenues
Costs:
$12,500,000
(10,000,000)
$2,500,000
(3,500,000)
$(1,000,000)
Fixed costs
Variable cost of goods sold
FE
Variable operating…
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
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.
$236,700
(108,000)
$128,700
(144,000)
$(15,300)
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
Revenues
Costs:
Variable cost of goods sold
Variable operating expenses
Fixed costs
Profit (Loss)
Cola
February 29
Continue…
Chapter 11 Solutions
Managerial Accounting
Ch. 11 - Explain the meaning of (A) differential revenue,...Ch. 11 - A company could sell a building for 250,000 or...Ch. 11 - A chemical company has a commodity-grade and...Ch. 11 - A company accepts incremental business at a...Ch. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Although the cost-plus approach to product pricing...Ch. 11 - How does the target cost method differ from...Ch. 11 - Prob. 10DQ
Ch. 11 - Lease or sell Plymouth Company owns equipment with...Ch. 11 - Prob. 2BECh. 11 - Make or buy A company manufactures various-sized...Ch. 11 - Replace equipment A machine with a book value of...Ch. 11 - Prob. 5BECh. 11 - Prob. 6BECh. 11 - Prob. 7BECh. 11 - Prob. 8BECh. 11 - Differential analysis for a lease or sell decision...Ch. 11 - Prob. 2ECh. 11 - Differential analysis for a discontinued product A...Ch. 11 - Differential analysis for a discontinued product...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Make-or-buy decision Somerset Computer Company has...Ch. 11 - Prob. 8ECh. 11 - Machine replacement decision A company is...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Sell or process further Calgary Lumber Company...Ch. 11 - Sell or process further Dakota Coffee Company...Ch. 11 - Prob. 13ECh. 11 - Accepting business at a special price Box Elder...Ch. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Product cost method of product costing Smart...Ch. 11 - Target costing Toyota Motor Corporation (TM) uses...Ch. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21ECh. 11 - Total cost method of product pricing Based on the...Ch. 11 - Variable cost method of product pricing Based on...Ch. 11 - Differential analysis involving opportunity costs...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Differential analysis for sales promotion proposal...Ch. 11 - Prob. 4PACh. 11 - Product pricing and profit analysis with...Ch. 11 - Product pricing using the cost-plus approach...Ch. 11 - Prob. 1PBCh. 11 - Differential analysis for machine replacement...Ch. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Prob. 6PBCh. 11 - Analyze Pacific Airways Pacific Airways provides...Ch. 11 - Service yield pricing and differential equations...Ch. 11 - Prob. 3MADCh. 11 - Prob. 4MADCh. 11 - Aaron McKinney is a cost accountant for Majik...Ch. 11 - Prob. 3TIFCh. 11 - Decision on accepting additional business A...Ch. 11 - Accepting service business at a special price If...Ch. 11 - Identifying product cost distortion Peachtree...Ch. 11 - Prob. 1CMACh. 11 - Prob. 2CMACh. 11 - Aril Industries is a multiproduct company that...Ch. 11 - Oakes Inc. manufactured 40,000 gallons of Mononate...
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