Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

تمرين 57

Differential analysis for a discontinued product
The condensed product-line income statement for Dish N' Dat Company for the month of March is as follows:
Dish N' Dat Company Product-Line Income Statement For the Month Ended March 31, 2016

Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses, Dish N' Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued.
a. Prepare a differential analysis dated March 31, 2016, to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2).
b. Should the Cups line be retained Explain.