A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year:

Sales	$237,500
Cost of goods sold	108,000
Gross profit	$129,500
Operating expenses	143,000
Loss from operations	$(13,500)

It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.

Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) January 21 Differential Effect Continue King Discontinue King Cola (Alternative 1) Cola (Alternative 2) on Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) $ $ $ b. Should Star Cola be retained? Explain. yeso As indicated by the differential analysis in part (A), the income would by $ if the product is discontinued. decrease increase