Differential Analysis for a Discontinued Product A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: Sales $237,600 Cost of goods sold 110,000 Gross profit $127,600 Operating expenses 146,000 Loss from operations $(18,400) 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. 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) January 21 Continue King Discontinue King Cola (Alternative 1) Cola (Alternative 2) Differential Effect on Income (Alternative 2) 237,600 237,600 Revenues Costs: Variable cost of goods sold Variable operating expenses Previous Next > Check My Work 25) Book Show Me How a. Prepare a differential analysis, dated March 3, to determine whether King Cols 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) January 21 Continue King Discontinue King Differential Effect on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) 21100 237,400 Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) -18,400 Feedback Check My Work For continue and discontinue alternatives subtract the costs from the revenue. 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. b. Should Star Cola be retained? Explain. Previous Next For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable from fxed costs Determine the different effect on income of the revenues, costs, and income (less) by subtracting alternative 2 from alternative 1 Should Star Cola be retained? Explain As indicated by the differential analysis in part (A), the income would the product is discontinued. Check My W For continue and discontinue alternatives subtract the costs from the revenue. Use percentages to separate variable frire feed costs Determine the different effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1. Tedes Previous Save and Exit Submit Assignment for Grading tv Partly conect Check My Work 11 S
