Dropping Product Lines Atlantic Soup Company is presently operating at 75 percent of capacity. Worried about the company’s performance, the president is considering dropping its clam chowder. If it is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company’s fixed costs would be reduced by 15 percent of the total fixed costs.

Segmented income statements appear as follows:

Required Prepare a differential cost schedule like the one in Exhibit 3.13 to indicate whether Atlantic should drop the clam chowder product line.

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Product Sales.. Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Tomato Clam Chowder Chicken Noodle $32,600 $42,800 $51,200 22,000 38,600 40,100 $10,600 $ 4,200 4,700 6,000 $ 5,900 $ (1,800) $11,100 7,100 $ 4,000