Differential Analysis for a Discontinued Product

The condensed product-line income statement for Suffolk China Ware Company for the month of December is as follows:

Suffolk China Ware Company Product-Line Income Statement For the Month Ended December 31, 2016
	Bowls			Plates			Cups
Sales	$65,600			$89,200			$27,500
Cost of goods sold	26,800			33,800			14,800
Gross profit	$38,800			$55,400			$12,700
Selling and administrative expenses	29,300			35,900			14,400
Income from operations	$9,500			$19,500			$(1,700)

Fixed costs are 12% of the cost of goods sold and 38% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated December 31, 2016, to determine if Cups 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 Cups (Alt. 1) or Discontinue Cups (Alt. 2)
December 31, 2016
	Continue Cups (Alternative 1)	Discontinue Cups (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)	$	$	$

b. Should the Cups line be retained?