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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
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 yeat: Sales Cost of goods sold Gross profit Operating expenses Loss from operations It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 23% 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. $236,400 111,000 $125,400 145,000 $(19,600) Differential Analysis Continue Fruit Cola (Alt.1) or Discontinue Fruit Cola (Alt. 2) Continue Fruit Cola (Alternative 1) Discontinue Fruit Cola (Alternative 2) Differential Effect on Income (Alternative 2) 236,400 236,400 Revenues Costs Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss)
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