Question

PORCELAIN TABLEWARE COMPANY Product-Line Income Statement
	Bowls			Plates			Cups
Sales	$653,000			$898,000			$259,000
Cost of goods sold	(257,000)			(322,000)			(144,000)
Gross profit	$396,000			$576,000			$115,000
Selling and administrative expenses	(287,000)			(359,000)			(149,000)
Operating income (loss)	$109,000			$217,000			$(34,000)

Fixed costs are 45% of the cost of goods sold and 15% of the selling and administrative expenses. Porcelain Tableware assumes that fixed costs would not be significantly affected if the Cups line were discontinued.

a. Prepare a differential analysis report for all three products.

PORCELAIN TABLEWARE COMPANY
Product Income
Differential Analysis Report
	Bowls	Plates	Cups
Differential revenue from monthly sales:
Revenue from sales	$	$	$
Differential costs of monthly sales:
Variable cost of goods sold	$	$	$
Variable selling and administrative expenses
	$	$	$
Monthly differential income from sales	$	$	$

Answer 1

PORCELAIN TABLEWARE COMPANY
Product Income
Differential Analysis Report
	Bowls	Plates	Cups
Differential revenue from monthly sales:
Revenue from sales	653,000	898,000	259,000
Differential costs of monthly sales:
Variable cost of goods sold	(141,350)	(177,100)	(79,200)
Variable selling and administrative expenses	(243,950)	(305,150)	(126,650)
	(385,300)	(482,250)	(205,850)
Monthly differential income from sales	267,700	415,750	53,150