Reference no: EM13576935

The condensed product-line income statement for Suffolk China Ware Company for the month of December is as follows:

Suffolk China Ware Company Product-Line Income Statement For the Month Ended December 31, 2014
	Bowls			Plates			Cups
Sales	$64,700			$88,800			$26,900
Cost of goods sold	26,800			32,400			15,800
Gross profit	$37,900			$56,400			$11,100
Selling and administrative expenses	28,600			34,000			15,900
Income from operations	$9,300			$22,400			$(4,800)

Fixed costs are 12% of the cost of goods sold and 40% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

Hide a. Prepare a differential analysis dated December 31, 2014, to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Differential Analysis Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2) December 31, 2014 Continue Cups (Alternative 1) Discontinue Cups (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $   $   $   Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Income (Loss) $   $   $

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Follow Example Exercise 24-2. For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1.

Learning Objective 1.

b. Should the Cups line be retained?
SelectYesNoCorrect 1 of Item