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 111,000 Gross profit $123,700 Operating expenses 143,000 Loss from operations $(19,300) It is estimated that 12% of the co goods sold represents fixed factory overhead costs and that 21% of the operating expenses are foxed. 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, enter zero "0". Use a minus sign to indicate a loss Revenues Costs: Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) Variable cost of goods sold Variable operating expenses January 21 Continue King Discontinue King Cola (Alternative 1) Cola (Alternative 2) 234.700 000 Differential Effect on Income (Alternative 2) -234700 Revenues Costs: Show Me How January 21 Continue King Discontinue King Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) Cola (Alternative 1) Cola (Alternative 2) 234,700 Differential Effect on Income (Alternative 2) 234,700 Feedback Check My Work For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1. b. Should Star Cola be retained? Explain. Yes As indicated by the differential analysis in part (A), the income would decrease by S if the product is discontinued. Feedback