Product Alpha has revenue of 545000 variable cost of goods s

Product Alpha has revenue of $545,000, variable cost of goods sold of $400,000, variable selling expenses of $65,000, and fixed costs of $90,000,Ro Show How creating a loss from operations of $10,000. Prepare a differential analysis as of December 10 to determine whether Product Alpha should be continued (Alternative 1) or discontinued (Alternative 2), assuming that fixed costs are unaffected by the decision.

Solution

Revenue

545000

COGS (variable)

400000

Variable selling exp

65000

Profit before Fixed Cost

80000

Fixed cost is unaffected i.e if Product Alpha is discontinued then also fixed cost remain same

Product Alpha need to be continued i.e (Alternative 1)

Revenue	545000
COGS (variable)	400000
Variable selling exp	65000
Profit before Fixed Cost	80000