Freeflight Airlines is presently operating at 70 percent of capacity. Management of the airline is considering dropping Freeflight's routes between Europe and the United States. If these routes are dropped, the revenue associated with the routes would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 20 percent Segmented income statements for a typical month appear as follows (all amounts in millions of dollars): Routes Sales Variable costs Fixed costs allocated to routes Operating profit (loss) Within Within U.S. Europe $ 3.38 $ 2.70 1.34 0.92 1.68 1.23 $ 0.36 $ 0.55 Between U.S. and Europe $ 2.75 1.72 1.33 S(0.30) Required: a. Prepare a differential cost schedule. (Enter your answers in millions rounded to 2 decimal places.) Status Quo Alternative: Drop Difference (all lower under U.S. to Europe the alternative) Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss) the alternat Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss) b. Should Freeflight drop the routes between Europe and the United States? Yes No References eBook & Resources Worksheet Difficulty: 2 Medium Exercise 4-49 Dropping Product Lines (LO 4-4) Learning Objective: 04- 04 Understand how to apply differential analysis to production decisions