eBook Show Me How Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. Indicated the following for Mango Cola for the past year: Sales $15,000,000 Cost of goods sold (10,800,000) Gross profit $4,200,000 Operating expenses Operating loss (8,000,000) $(3,800,000) It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the operating expenses are fixed. Because Mango 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 February 29 to determine whether Mango Cola 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) Mango Cola February 29 Continue Mango Cola Discontinue Mango Cola Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) 235,300 X 0 235,300 X Revenus Costs: Variable cost of goods sold - 92.650 X 0 92,650 X Check My Work 2 more Check My Work uses remaining Previous Next> Show Me How Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Discontinue Differential Mango Colal Mango Cola (Alternative 1) (Alternative 2) Effects (Alternative 2) 235,300 X $ 0 -235,300 X Revenues Costs: Variable cost of goods sold 92,650 X 0 92,650 X Variable operating expenses -113,100 X 0 113,100 X Fixed costs -48,250 X 48,250 X 0 Profit (Loss) -18,700 X -48,250 X -29,550 X Feedback Check My Work For continue and discontinue alternatives subtract the costs from the revenues. Use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. b. Should Mango Cola be retained? Yes