06 Nov For the three cases that follow, prepare a differential analysis. Case A (Discontinue a Product): Product K has r
For the three cases that follow, prepare a differential analysis.
• Case A (Discontinue a Product): Product K has revenue of $65,000, variable cost of goods sold of $50,000, variable selling expenses of $12,000, and fixed costs of $25,000, creating a loss from operations of $(22,000).
o Required: Prepare a differential analysis dated February 22 to determine whether to continue Product K (Alternative 1) or discontinue Product K (Alternative 2), assuming fixed costs are unaffected by the decision.
• Case B (Make versus Buy): A company manufactures a component of a product for $80 per unit, including fixed costs of $25 per unit. The component could be purchased from an outside supplier for $60 per unit, plus $5 per unit freight.
o Required: Prepare a differential analysis dated November 2 to determine whether the company should make (Alternative 1) or buy (Alternative 2), assuming fixed costs are unaffected by the decision.
• Case C (Sell or Process Further): Product T is produced for $2.50 per gallon. Product T can be sold without additional processing for $3.50 per gallon or processed further into Product V at an additional total cost of $0.70 per gallon. Product V can be sold for $4.00 per gallon.
o Required: Prepare a differential analysis dated April 8 to determine whether to sell Product T (Alternative 1) or process it further into Product V (Alternative 2).
Requirement:
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Case A (Discontinue a Product): (2 points)
Continue Product K
(Alt. 1) Discontinue Product K
(Alt. 2) Differential Effects
(Alt. 2)
Revenues
Costs:
Variable
Fixed
Profit (loss)
Here is the partial answer. You have to finish the rest.
Case B (Make vs. Buy): (2 points)
Make Component
(Alt. 1) Buy Component
(Alt. 2) Differential Effects
(Alt. 2)
Unit costs:
Purchase price
Freight
Variable costs
Fixed factory
overhead
Total unit costs
Here is the partial answer. You have to finish the rest.
Case C (Sell or Process Further): (1 point)
Sell Product T
(Alt. 1) Process Further
Product V
(Alt. 2) Differential Effects
(Alt. 2)
Revenues
Costs, per unit
Profit (loss)
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