Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. 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$42,200$51,200

Variable costs22,68037,98040,960

Contribution margin$9,720$4,220$10,240

Fixed costs allocated to each product line4,2006,4006,900

Operating profit (loss)$5,520$(2,180)$3,340

Required:

a.make a differential cost schedule.

...............................|.Status Quo.........|..Alternative: Drop Strawberry....|...Difference (all lower under the alternative)

Revenue:

Less: Variable Costs

Contribution margin

Less: Fixed Costs

Operating profit (loss)

b.Should Cotrone drop the Strawberry product line?

Yes or No?