Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently operating at 75 percent of capacity. Worried about the company's performance, the company president is considering dropping the Strawberry flavor. If Strawberry is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent.

Segmented income statements appear as follows:

Product	Original				Strawberry				Orange
Sales	$	32,700			$	43,500			$	50,900
Variable costs		22,890				39,150				40,720
Contribution margin	$	9,810			$	4,350			$	10,180
Fixed costs allocated to each product line		4,800				5,600				7,900
Operating profit (loss)	$	5,010			$	(1,250	)		$	2,280

Required:

a. Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.)

	status	alternative: drop strawberry	difference	increase or decrease
revenue
less: variable costs
contribution margin
less: fixed costs
operating profit (loss)

b. Should Cotrone drop the Strawberry product line?

• Yes

• No