Differential Analysis for a Discontinued Product A condensed income statement by product line for Lavonia Beverage Inc. indicated the following for Vim Cola for the past year: Sales Cost of goods sold $236,800 (108,000) Gross profit Operating expenses Operating loss $128,800 (144,000) $(15,200) It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Because Vim Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet a. Prepare a differential analysis dated November 2 to determine whether Vim Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. a. Prepare a differential analysis dated November 2 to determine whether Vim Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Vim Cola November 2 Revenues: Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (Loss) b. Should Vim Cola be retained? Yes Feedback Continue Vim Cola (Alternative 1) 236,800 Discontinue Differential Vim Cola (Alternative 2) Effects (Alternative 2) $ 0 236,800 -92,400 X 91,800 X 110,880 110,880 -50,490 X -15,200 x x Check My Work For continue and discontinue alternatives subtract the costs from the revenues. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2