Answer:
Mufflers should be continued (Alternative 1)
Explanation:
Preparation of a differential analysis dated to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2).
DIFFERENTIAL ANALYSIS
Continued (Alternative 1); Discontinued (Alternative 2); Differential effect on income Alternative 2)
October 31
Revenue $45,000 $0 ($45,000)
Costs:
Variable cost of goods sold ($21,600) $0 $21,600
[$27,000*(1-20%)]
Variable selling and administrative expense
($17,500) $0 $17,500
[$25,000*(1-30%)]
Fixed income ($12,900) ($12,900) $0
[($27,000*20%)+($25,000*30%)]
Income(Loss) ($7,000) ($12,900) ($5,900)
Based on the above Differential Analysis MUFFLERS SHOULD BE CONTINUED reason been that the income will decrease by $5,900 if Mufflers discontinued.
