1. A condensed income statement by product line for Master Energy Co. indicated the following for the Master Energy product line for the past year:

Revenues and Costs	Dollar Amount
Sales	$12,500,000
Cost of goods sold	8,250,000
Gross profit	4,250,000
Operating expenses	6,010,000
Loss from operations	(1,760,000)

It is estimated that 25% of the cost of goods sold represents fixed factory overhead costs and that 15% of the operating expenses are fixed. Because Master Energy is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

1. Prepare a differential analysis dated January 31st to determine whether Master Energy should be continued (Alternative 1) or discontinued (Alternative 2).
2. Should Master Energy be retained? Explain