Differential Analysis for a Discontinued Product A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year: Sales Cost of goods sold $236,600 110,000 Gross profit Operating expenses Loss from operations $126,600 146,000 $(19,400) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Fruit 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 January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis Continue Fruit Cola (Alt. 1) or Discontinue Fruit Cola (Alt. 2) January 5 Continue Fruit Cola (Alternative 1) Discontinue Fruit Cola (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) Feedback 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 2 from alternative 1. Learning Objective 1