Question

The condensed product-line income statement for Rhinebeck Company for the month of October is as follows:

Rhinebeck Company Product-Line Income Statement For the Month Ended October 31
	Hats			Gloves			Mufflers
Sales	$65,100			$88,400			$26,700
Cost of goods sold	(25,400)			(33,000)			(14,400)
Gross profit	$39,700			$55,400			$12,300
Selling and administrative expenses	(29,600)			(33,900)			(15,800)
Operating income (loss)	$10,100			$21,500			$(3,500)

Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued.

a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue (Alt. 1) or Discontinue (Alt. 2) Mufflers
October 31
	Continue Mufflers (Alternative 1)	Discontinue Mufflers (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 42af44f9f036f9d_1	$fill in the blank 42af44f9f036f9d_2	$fill in the blank 42af44f9f036f9d_3
Costs:
Variable cost of goods sold	fill in the blank 42af44f9f036f9d_4	fill in the blank 42af44f9f036f9d_5	fill in the blank 42af44f9f036f9d_6
Variable selling and admin. expenses	fill in the blank 42af44f9f036f9d_7	fill in the blank 42af44f9f036f9d_8	fill in the blank 42af44f9f036f9d_9
Fixed costs	fill in the blank 42af44f9f036f9d_10	fill in the blank 42af44f9f036f9d_11	fill in the blank 42af44f9f036f9d_12
Profit (Loss)	$fill in the blank 42af44f9f036f9d_13	$fill in the blank 42af44f9f036f9d_14	$fill in the blank 42af44f9f036f9d_15

b. Should the Mufflers line be retained?

Answer 1