A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year:
|Cost of goods sold||(112,000)|
It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.
a. Prepare a differential analysis dated February 29 to determine whether Mango Cola 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.
|Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola|
|Variable cost of goods sold|
|Variable operating expenses|
b. Should Mango Cola be retained?
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