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
| A | B | C | D | |
| 1 | Differential Analysis | |||
| 2 | Continue Product (Alt. 1) or Discontinue Product (Alt. 2) | |||
| 3 | ||||
| 4 | Continue | Discontinue | Differential Effect on Income (Alternative 2) | |
| 5 | Revenues | |||
| 6 | Costs: | |||
| 7 | Variable cost of goods sold | |||
| 8 | Variable selling and admin. expenses | |||
| 9 | Fixed costs | |||
| 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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