Discontinue a Segment
Product T has revenue of $193,800, variable cost of goods sold of $115,800, variable selling expenses of $33,800, and fixed costs of $59,800, creating a loss from operations of $15,600.
Prepare a differential analysis as of May 9, to determine whether Product T should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis  
Continue Product T (Alt. 1) or Discontinue Product T (Alt. 2)  
May 9  
Continue Product T (Alternative 1) 
Discontinue Product T (Alternative 2) 
Differential Effect on Income (Alternative 2) 

Revenues  $  $  $ 
Costs:  
Variable cost of goods sold  
Variable selling expenses  
Fixed costs  
Income (Loss)  $  $  $ 
Determine if Product T should be continued (Alternative 1) or discontinued (Alternative
Differential analysis  
Continue  Discontinue  Differential  
Product  Product  effect on income  
Revenue  1,93,800  0  1,93,800  
Cost:  
Variable cost of goods sold  1,15,800  0  1,15,800  
Variable selling expense  33,800  0  33,800  
Fixed cost  59,800  59,800  0  
Income /(Loss)  15,600  59,800  44,200  
Net financial disadvantage of Discontinuance is ($44200).  
Hence, the Product T shall continue  
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