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A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales $393.100 Cost of
A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales $393.100 Cost of goods sold 189,900 Gross profit $203.200 Operating expenses 254,400 Loss from operations $ (51,200) It is estimated that 20% of the cost of goods sold represents fixed factory overhead costs and that 28% 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. Labels Cash flows from investing activities Required: Costs a. Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative Amount Descriptions 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 Fixed costs you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "O". A colon (-) will Gain on sale investments automatically appear if required. b. Should Fruit Cola be retained? Explain Income (loss) Loss on sale of investments 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 Revenues 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, Variable cost of goods sold enter "O". A colon () will automatically appear if required. Variable operating expenses b. Should Fruit Cola be retained? Explain. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Fruit Cola O No January 5 O Yes Continue Fruit Discontinue Fruit Differential Effect 1 Cola Cola on Income 2 (Alternative 1) (Alternative 2) As indicated by the differential analysis in part (a), the income would Increase Decrease (Alternative 2) 3 by $ if the product is discontinued. 4 Label) 5 6
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