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: Sales $235,000 Cast of goods sold 109,000 Gross profit $125,000 Operating expenses 144,000 Loss from S(18.000) 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 Royal Cola should be continued (Alterative 1) or discontinued (Alternative 2). If an amount is zero, enter zero 'o'. Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (AIL. 2) January 21 Continue Royal Discontinue Royal Differential Effect on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) $ b. Should Star Cola be retained? Explain. As indicated by the differential analysis in part (A), the income would if the product is discontinued. decrease increase