Question

Differential Analysis Report for a Discontinued Product The condensed product-line income statement for Dinner Ware Company is as follows: DINNER WARE COMPANY Product-Line Income Statement Bowls Plates Cups Sales $1,500,000 $2,350,000 $975,000 (900,000) Cost of goods sold Gross profit (1,400,000) $950,000 (700,000) $250,000 $600,000 (270,000) $330,000 (780,000) $195,000 (300,000) $(105,000) Selling and administrative expenses Operating income (loss) Fixed costs are 40% of the cost of goods sold and 18% of the selling and administrative expenses. Dinner Ware assumes that fixed costs woul not be significantly affected if the Cups line were discontinued. a. Prepare a differential analysis report for all three products, Dinner Ware Company Product Income Differential Product Analysis Report Bowls Differential revenue from monthly sales: Plates Cups

Answer 1

	Bowls	Plates	Cups
Differential revenue from monthly sales
Revenue from sales	1500000	2350000	975000
Differential costs of monthly sales
Variable cost of goods sold	540000	840000	468000
Variable selling and administrative expenses	221400	574000	246000
	761400	1414000	714000
Monthly Differential income from sales	738600	936000	261000
Workings:
	Bowls	Plates	Cups
Variable cost of goods sold	=900000*60%	=1400000*60%	=780000*60%
Variable selling and administrative expenses	=270000*82%	=700000*82%	=300000*82%