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

Sales	$233,100
Cost of goods sold	108,000
Gross profit	$125,100
Operating expenses	143,000
Loss from operations	$(17,900)

It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 20% 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.

Question Content Area

a. Prepare a differential analysis, dated March 3, to determine whether to Continue King Cola (Alternative 1) or Discontinue King Cola (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Continue King Cola (Alternative 1)	Discontinue King Cola (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank cc752105cf82007_1	$fill in the blank cc752105cf82007_2	$fill in the blank cc752105cf82007_3
Costs:
Variable cost of goods sold	fill in the blank cc752105cf82007_4	fill in the blank cc752105cf82007_5	fill in the blank cc752105cf82007_6
Variable operating expenses	fill in the blank cc752105cf82007_7	fill in the blank cc752105cf82007_8	fill in the blank cc752105cf82007_9
Fixed costs	fill in the blank cc752105cf82007_10	fill in the blank cc752105cf82007_11	fill in the blank cc752105cf82007_12
Profit (loss)

Question Content Area

b. Should King Cola be retained? Explain.

YesNo

As indicated by the differential analysis in part (A), the income would

decreaseincrease

by $fill in the blank b46a09f80fa4fbc_3 if the product is discontinued.