Differential Analysis for a Discontinued Product A condensed income statement by product line for Crown Beverage Inc. indicated the following for Royal Cola for the past year: $236,900 Sales Cost of goods sold 108,000 Gross profit Operating expenses $128.900 145,000 $(16,100) Loss from operations It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 22% of the operating expenses are fixed. Since Royal 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 to Continue Royal Cola (Alternative 1) or Discontinue Royal Cola (Alternative 2). If an amount is zero, enter zero "O". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) March 3 Continue Royal Discontinue Royal Differential Effects Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Elvaro LOSS Om opera TOTS (16,IUUJ It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 22% of the operating expenses are fixed. Since Royal 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 to Continue Royal Cola (Alternative 1) or Discontinue Royal Cola (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) March 3 Continue Royal Discontinue Royal Differential Effects Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (loss) b. Should King Cola be retained? Explain. As indicated by the differential analysis in part (A), the income would by S if the product is discontinued