BLONDE ESPRESSO COMPANY
Product-Line Income Statement
Light Roast Medium Roast Dark Roast
Sales $750,000 $1,175,000 $487,500
Cost of goods sold (450,000) (700,000) (390,000)
Gross profit $300,000 $475,000 $97,500
Selling and administrative expenses (135,000) (350,000) (150,000)
Operating income (loss) $165,000 $125,000 $(52,500)
Fixed costs are 40% of the cost of goods sold and 18% of the selling and administrative expenses. Blonde Espresso assumes that fixed costs would not be significantly affected if the Dark Roast line were discontinued.
BLONDE ESPRESSO COMPANY
Product-Line Income Statement
Differential Analysis Report
Light Roast Medium Roast Dark Roast
Differential revenue from monthly sales:
Accounts receivable $fill in the blank 36113607a05d033_13
Cash $fill in the blank 36113607a05d033_14
Fixed selling and administrative expenses $fill in the blank 36113607a05d033_15
Revenue from sales $Revenue from sales $Revenue from sales
Differential cost of monthly sales:
Accounts receivable $fill in the blank 36113607a05d033_16
Fixed cost of goods sold $fill in the blank 36113607a05d033_17
Fixed selling and administrative expenses $fill in the blank 36113607a05d033_18
Revenue from sales $Variable cost of goods sold $Variable cost of goods sold
Variable cost of goods sold $Variable cost of goods sold $Variable cost of goods sold
Accounts receivable $Fixed cost of goods sold $Fixed selling and administrative expenses
Revenue from sales $Variable selling and administrative expenses $Variable selling and administrative expenses
Variable selling and administrative expenses $Variable selling and administrative expenses $Variable selling and administrative expenses
Total differential costs $fill in the blank 36113607a05d033_13 $fill in the blank 36113607a05d033_14 $fill in the blank 36113607a05d033_15
Monthly differential income from sales $fill in the blank 36113607a05d033_16 $fill in the blank 36113607a05d033_17 $fill in the blank 36113607a05d033_18
b. Should the Dark Roast line be retained?
The Dark Roast line should be discontinued. The Dark Roast line should be retained. The Dark Roast line should be retained.
