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b$.$ Should the Socks line be retained?

Differential analysis for a discontinued product The condensed product-line income statement for Northem Lights Company for the month of August is as follows: Northern Lights Company Product-Line Income Statement For the Month Ended August 31 Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income (loss) Hats $64,300 (26,400) $37,900 (28,400) Sg,soo Gloves $89,100 (32,100) $57,000 (35,700) $21,300 $27,700 (15,500) $12,200 (14,700) Fixed costs are of the cost of goods sold and 41% 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 September 14 to determine if Socks should be continued (Alternative I) or discontinued (Alternative 2). If an amount is zero, enter If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. I) or Discontinue (Alt. 2) Socks September 14 Continue Socks Discontinue Socks Differential Line Item Description Revenues Variable cost of goods sold (Alternative I) (Altemative 2) (Alternative 2) $c:nv Variable selling and admin. expenses Fixed costs Profit (Loss) My VWk For continue and discontinue alternatives subtract the costs from the revenue. use percentages to separate variable from fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting altemative I from alternative 2. b. Should the Socks line be retained? Yes