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

Sales $$235,200$

Cost of goods sold $110,000$

Gross profit $$125,200$

Operating expenses $145,000$

Loss from operations $$(19,800)$

It is estimated that $13\%$ of the cost of goods sold represents fixed factory overhead costs and that $21\%$ 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.

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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 $21$

Continue King

Cola $($Alternative $1)$ Discontinue King

Cola $($Alternative $2)$ Differential Effect

on Income

$($Alternative $2)$

Revenues $fill in the blank $7$b$8969$fd$607801$f$\_1$

$fill in the blank $7$b$8969$fd$607801$f$\_2$

$fill in the blank $7$b$8969$fd$607801$f$\_3$

Costs:

Variable cost of goods sold fill in the blank $7$b$8969$fd$607801$f$\_4$

fill in the blank $7$b$8969$fd$607801$f$\_5$

fill in the blank $7$b$8969$fd$607801$f$\_6$

Variable operating expenses fill in the blank $7$b$8969$fd$607801$f$\_7$

fill in the blank $7$b$8969$fd$607801$f$\_8$

fill in the blank $7$b$8969$fd$607801$f$\_9$

Fixed costs fill in the blank $7$b$8969$fd$607801$f$\_10$

fill in the blank $7$b$8969$fd$607801$f$\_11$

fill in the blank $7$b$8969$fd$607801$f$\_12$

Income $($Loss$)$ $fill in the blank $7$b$8969$fd$607801$f$\_13$

$fill in the blank $7$b$8969$fd$607801$f$\_14$

$fill in the blank $7$b$8969$fd$607801$f$\_15$

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b$.$ Should Star Cola be retained? Explain.

Yes

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

decrease

by $fill in the blank $0$ab$607024$fc$9060\_3$

if the product is discontinued.