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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
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 Strawberry Product Original Orange Sales $33,200 $43,100 $51,100 Variable costs 23,240 38,790 40,880 Contribution margin 9,960 4,500 4,310 $10,220 6,900 Fixed costs allocated to each product line 5,700 5,460 (1,390) 3,320 Operating profit (loss) 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.) Alternative: Drop Strawberry Status Quo Difference Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss)
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