Question

Discontinue a Segment Product AG52 has revenues of $194,300, variable cost of goods sold of $113,600, variable selling expenses of $32,700, and fixed costs of $58,000, creating a loss from operations of $10,000 a. Prepare a differential analysis as of October 7 to determine if Product AG52 should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "O". Use a minus sign to indicate a loss Differential Analysis Continue Product AG52 (Alt. 1) or Discontinue Product AG52 (Alt. 2) October 7 Continue Product AG52 (Alternative 1) Differential Effect on Income Alternative 2) Discontinue Product AG52 (Alternative 2) Revenues 0 Costs Variable cost of goods sold Variable selling expenses Fixed costs 0 Income (Loss) b. Determine if Product AG52 should be continued (Alternative 1) or discontinued (Alternative 2)

Answer 1

Differential analysis :

	Continue product AG52	Discontinue product AG52	Differential effect on income
Revenues	194300	0	-194300
Costs:
Variable cost of goods sold	-113600	0	113600
Variable selling expense	-32700	0	32700
Fixed cost	-58000	-58000	0
Income (loss)	-10000	-58000	-48000

b) Product AG52 should be continue