Differential Analysis for a Discontinued Product

A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year:

Sales	$237,100
Cost of goods sold	(112,000)
Gross profit	$125,100
Operating expenses	(142,000)
Operating loss	$(16,900)

It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Mango 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 February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola
February 29
	Continue Mango Cola (Alternative 1)	Discontinue Mango Cola (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 9cd75102cf87fc1_1	$fill in the blank 9cd75102cf87fc1_2	$fill in the blank 9cd75102cf87fc1_3
Costs:
Variable cost of goods sold	fill in the blank 9cd75102cf87fc1_4	fill in the blank 9cd75102cf87fc1_5	fill in the blank 9cd75102cf87fc1_6
Variable operating expenses	fill in the blank 9cd75102cf87fc1_7	fill in the blank 9cd75102cf87fc1_8	fill in the blank 9cd75102cf87fc1_9
Fixed costs	fill in the blank 9cd75102cf87fc1_10	fill in the blank 9cd75102cf87fc1_11	fill in the blank 9cd75102cf87fc1_12
Profit (Loss)	$fill in the blank 9cd75102cf87fc1_13	$fill in the blank 9cd75102cf87fc1_14	$fill in the blank 9cd75102cf87fc1_15

b. Should Mango Cola be retained?