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

Sales	$395,100
Cost of goods sold	182,700
Gross profit	$212,400
Operating expenses	256,900
Loss from operations	$ (44,500)

It is estimated that 21% of the cost of goods sold represents fixed factory overhead costs and that 27% of the operating expenses are fixed. Because Fruit Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

	Required:
a.	Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
b.	Should Fruit Cola be retained? Explain.

a. Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.

Differential Analysis

Continue (Alternative 1) or Discontinue (Alternative 2) Fruit Cola

January 5

1		Continue Fruit Cola	Discontinue Fruit Cola	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4
5
6
7
8

b. Should Fruit Cola be retained? Explain.

No

Yes

As indicated by the differential analysis in part (a), the income would by if the product is discontinued.