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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
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 $237,500 Cost of goods sold 108,000 Gross profit $129,500 Operating expenses 145,000 Loss from operations $(15,500) It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 18% 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 "0". Use a minus sign to indicate a loss. Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) March 3 Continue King Cola (Alternative 1) Discontinue King Cola (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) March 3 Continue King Cola (Alternative 1) Discontinue King Cola (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) b. Should King Cola be retained
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