A company needs to know if they should discontinue a product.
Product Stats:
Sales = $200,000
Variable costs = $125,000
Fixed costs = $50,000
Total cost of goods sold $175,000
Gross profit $25,000
Variable selling and admin. expenses $28,000
Fixed selling and admin. expenses $22,000
Total selling and admin. expenses $50,000
Income (loss) from operations $25,000
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A |
B |
C |
D |
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1 |
Differential Analysis |
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2 |
Continue Product (Alt. 1) or Discontinue Product (Alt. 2) |
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3 |
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4 |
Continue |
Discontinue |
Differential Effect on Income (Alternative 2) |
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5 |
Revenues |
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6 |
Costs: |
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7 |
Variable cost of goods sold |
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8 |
Variable selling and admin. expenses |
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9 |
Fixed costs |
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10 |
Income (Loss) |
Af?cAc‚¬”$25,000 |
Af?cAc‚¬”$??????? |
Af?cAc‚¬”$ ???????? |
I’m really confused how the Income (loss) for Alternative 1 ends up being $25,000. When I try I don’t end up with that number. Could you please show me what to do for the first column Alternative 1? I want to compare and see what I’m doing wrong, thanks.
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