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Accounting

A condensed income statement by product line for British Beverage Inc., indicated the following for Royal Cola for the pst year:

Sales 254,000
Cost of Goods Sold 122,000
Gross profit 132,000
Operating expenses 156,000
Loss from Operations -24,000

It is estimates that 16% of the cost of goods sold represents fixed factory overhead costs and that 20% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially afected if the product is discontinued.

a. Prepare a differntial analysis report, dated March 3, 2010, for the proposed discontinuance of Royal Cola.

b. Should ROyal COla be retained? Explain.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9402898

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