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EX 25-4 Differential analysis for a discontinued product OBJ. 1 The condensed product-line income statement for Dish N' Dat Company for the month of May is as follows: Dish N' Dat Company Product-Line Income Statement For the Month Ended May 31 Bowls Plates Sales $71,000 $105,700 Cost of goods sold 32.600 42,300 Gross profit $38,400 $ 63,400 Selling and administrative expenses 27,400 42,800 Inco from operations $11,000 $ 20,600 Cups $33,500 20,600 $12,900 17,200 $(4,300) Fixed costs are 15% of the cost of goods sold and 30% of the selling and administra- tive expenses. Dish N' Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). b. Should the Cups line be retained? Explain. 1 Exercise 25-4 Name: Section: 5 Score: 11% NDAN a Differential Effect on Income (Alternative 2) Key Code Keycode here 8 Instructions 9 Answers are entered in the cells with gray backgrounds 10 Cells with non-gray backgrounds are protected and cannot be edited. 11 An asterisk (*) will appear to the night of an incorrect entry 12 Entor a zero in cells you would otherwise leave blank, 13 14 a. Differential Analysis 15 Continue Cups (Alt. 1) or Discontinue Cups (Alt 2) 16 For the Month Ended May 31 17 Continue Discontinue 18 Cups Cups 19 (Alternative 1) Alternative 2) 20 Revenues 21 Costs: 22 Variable cost of goods sold 23 Variable selling and admin expenses 24 Fixed costs 25 Income (los) 20 27 28 b. 29 The Cups line should be retained since Income JU 31 would decrease by if the cups is discontinued 32 33 34 35 36 37 38 30 40 41 42 43 44

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