Differential Analysis for a Discontinued Product

A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year:

Sales	$234,700
Cost of goods sold	108,000
Gross profit	$126,700
Operating expenses	145,000
Loss from operations	$(18,300)

It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 21% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.

Differential Analysis
Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2)
January 21
	Continue King Cola (Alternative 1)	Discontinue King Cola (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank 7bd43202b027fca_1	$fill in the blank 7bd43202b027fca_2	$fill in the blank 7bd43202b027fca_3
Costs:
Variable cost of goods sold	fill in the blank 7bd43202b027fca_4	fill in the blank 7bd43202b027fca_5	fill in the blank 7bd43202b027fca_6
Variable operating expenses	fill in the blank 7bd43202b027fca_7	fill in the blank 7bd43202b027fca_8	fill in the blank 7bd43202b027fca_9
Fixed costs	fill in the blank 7bd43202b027fca_10	fill in the blank 7bd43202b027fca_11	fill in the blank 7bd43202b027fca_12
Income (Loss)	$fill in the blank 7bd43202b027fca_13	$fill in the blank 7bd43202b027fca_14	$fill in the blank 7bd43202b027fca_15

b. Should Star Cola be retained? YES OR NO

As indicated by the differential analysis in part (A), the income would BLANK by $ BLANK if the product is discontinued.