EX 24-3 Differential analysis for a discounted product. A condensed income state
ID: 2483928 • Letter: E
Question
EX 24-3 Differential analysis for a discounted product.
A condensed income statement by product line for Celestial Beverage Inc. Indicated the following for Star Cola for the past year:
It is estimated that 15% of the cost of goods sold represents fixed factory overhead cost and that 25% of the operating expenses are fixed. Since Star Cola is only one of many products, the final cost won’t be materially affected if the product is discontinued.
a. prepare a differential analysis, dated January 21,2014, to determine whether Star Cola should be continued( alternate 1) or discontinued (alternate 2).
Explanation / Answer
(alternative 1) = If the product would discontinued then fixed cost will continue to be incurr and the overall income of the company would reduce by the amount of fixed cost
(alternative 2) = If the final cost of product would not materially affter the overall income of the company then, the product will be discontinued
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.