Discontinue a Segment Product AG52 has revenues of $194,700, variable cost of go

Question

Discontinue a Segment

Product AG52 has revenues of $194,700, variable cost of goods sold of $115,300, variable selling expenses of $33,000, and fixed costs of $58,000, creating a loss from operations of $11,600.

a. Prepare a differential analysis as of October 7 to determine if Product AG52 should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss.

b. Determine if Product AG52 should be continued (Alternative 1) or discontinued (Alternative 2).

Differential Analysis Continue Product AG52 (Alt. 1) or Discontinue Product AG52 (Alt. 2) October 7 Continue Product AG52 (Alternative 1) Discontinue Product AG52 (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs: Variable cost of goods sold Variable selling expenses Fixed costs Income (Loss) $ $ $

Explanation / Answer

Differential analysis Continue Product A or Discontinue Product A Continue Product A Discontinue Product A Differential effect on income Revenues 194700 0 -194700 Costs: Variable cost of goods sold -115300 0 115300 Variable selling and admin expenses -33000 0 33000 Fixed costs -58000 -58000 0 Income(loss) -11600 -58000 -46400 b Product AG52 should be continued

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