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: $233,400 108,000 Sales Cost of goods sold Gross profit Operating expenses $125,400 145,000 Loss from operations $(19,600) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 22% of the operating expenses are fixed. 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 zero, enter zero "O". Use a minus sign to indicate a loss. Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) January 21 Differential Effect Continue King Discontinue King on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues 283,460 -233,400 Costs Variable cost of goods sold Variable operating expenses Fiverrets LOSS Tom operations It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 22% of the operating expenses are fixed. Si 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 (Alternat zero, enter zero "O". Use a minus sign to indicate a loss. Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) January 21 Differential Effect Continue King Discontinue King on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues 233,400 Costs: Variable cost of goods sold Variable operating expenses Fixed costs o -233.400 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