Product Tango has revenue of $195,200, variable cost of goods sold of $115,600, variable selling expenses of $33,000, and fixed costs of $58,300, creating an operating loss of $(11,700). Required:
a. Prepare a differential analysis as of February 13 to determine if Product Tango should be continued or discontinued , assuming fixed costs are unaffected by the decision.
b. Determine if Product Tango should be continued

a.

Differential analysis on whether to continue or discontinue Product Tango

                                     Continue                Discontinue

Sales                            $195,200                       $0

Less Variable Costs :

Cost of Goods Sold    ($115,600)                       $0

Selling Expenses         ($33,000)                       $0

Less Fixed Costs :

Fixed Costs                  ($58,300)                 ($58,300)

Net Income/ (Loss)       ($12,300)                 ($58,300)

b

Continue with Product Tango. Because it brings a contribution towards the Fixed Costs helping to achieve a smaller loss margin.

Explanation:

From the differential analysis, Fixed costs will remain the same whether the product is discontinued or not. This is because they are centrally controlled. Only the variable costs would change.

answerinnovative culture;