Differential analysis for a discontinued product OBJ. 1 The condensed product-line income statement for Dish N’ Dat Company for the month of March is as follows:

Dish N’ Dat Company Product-Line Income Statement For the Month Ended March 31, 2016 Bowls Plates Cups Sales $71,000 $105,700 $31,300 Cost of goods sold 32,600 42,300 16,800 Gross profit $38,400 $ 63,400 $14,500 Selling and administrative expenses 27,400 42,800 16,700 Income from operations $11,000 $ 20,600 $(2,200)

Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Dish N’ Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated March 31, 2016, to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2).

b. Should the Cups line be retained? Explain.