Differential Analysis for a Discontinued Product The condensed product-line income statement for Northern Lights Company for the month of August is as follows: Northern Lights Company Product-Line Income Statement For the Month Ended August 31 Hats Gloves Socks Sales $65,200 $90,100 $26,700 Cost of goods sold (25,900) (33,000) (14,100) Gross profit $39,300 $57,100 $12,600 Selling and administrative expenses (30,000) (35,900) Operating income (loss) $9,300 $21,200 (15,500) $(2,900) Fixed costs are 15% of the cost of goods sold and 36% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were discontinued. a. Prepare a differential analysis dated August 31 to determine if Socks 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) Socks Line Item Description Revenues August 31 Continue Discontinue Differential Socks Socks Effects (Alternative 1) (Alternative 2) (Alternative 2) Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) b. Should the Socks line be retained?