
Answer and Explanation:
The preparation of the differential analysis is presented below:
Particulars  Order rejected (Alternative 1) order accepted  (Alternative 2) Differential Effect on Income (Alternative 2)
Revenues     $0                        $576,000   $576,000
                                    ($18,000 × $32)
Costs  Â
Variable Manufacturing Costs $0 Â Â Â Â Â Â Â Â Â $522,000 -$522,000
                                    ($18,000 × $29)
Income (Loss) Â Â Â Â $0 Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â $54,000 Â Â $54,000
We simply deduct the variable manufacturing cost from the revenues so that the income or loss could come