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			$	42,200			$	51,000
Variable costs		22,890				37,980				40,800
Contribution margin	$	9,810			$	4,220			$	10,200
Fixed costs allocated to each product line		5,100				5,900				7,100
Operating profit (loss)	$	4,710			$	(1,680	)		$	3,100

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.)

b. Should Cotrone drop the Strawberry product line?

multiple choice

• Yes

• No