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	$	32,400			$	43,100			$	51,500
Variable costs		22,680				38,790				41,200
Contribution margin	$	9,720			$	4,310			$	10,300
Fixed costs allocated to each product line		5,200				5,700				6,900
Operating profit (loss)	$	4,520			$	(1,390	)		$	3,400

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 Quo	Alternative: Drop Strawberry	Difference
Revenue
Less: Variable costs
Contribution margin
Less: Fixed costs
Operating profit (loss)

b. Should Cotrone drop the Strawberry product line?

multiple choice

Yes

No