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 $600,000 $1,400,000 $375,000 Cost of goods sold (400,000) (700,000) (345,000) Gross profit $200,000 $700,000 $30,000 Selling and administrative expenses (75,000) (300,000) (50,000) Operating income (loss) $125,000 $400,000 $(20,000) Fixed costs are 30% of the cost of goods sold and 15% of the selling and administrative expenses. Northern Lights Company assumes that fixed costs would not be materially affected if the Socks line were discontinued.