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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

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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 Sales Variable costs Original Strawberry Orange $32,900 $42.800 $51.400 38,520 9,870 4,280 $10,280 5,900 4,670 (1,620) 2,880 23,030 41.120 Contribution margin Fixed costs allocated to each product line 5,200 7,400 Operating profit (loss) Required a. Prepare a differential cost schedule Status Quo Drop Strawberry the alternative) lower under Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss) b. Should Cotrone drop the Strawberry product line? Yes O No

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