Differential analysis for a discontinued product

The condensed product-line income statement for Dosh N' Company for the month of May is as follows:

Dish N' Dat Company

Product-Line Income Statement

Bowls Plates Cups

Sales $71,000 $105,700 $33,500

Cost of good sold 32,600 42,300 20,600

Grossprofit $38,400 $63,400 $12,900

Selling and admin expenses 27,4000 42,800 17,200

Income from operation $11,000 $20,600 $(4,300)

Fixed costs are 15% of the cost of goods sold and 30% of the selling and admin expenses. Dish N' Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2)

b. Should the cups line be retained? Explain