Gilbert Canned Produce (GCP) packs and sells three varieties of canned produce: green beans; sweet peas; and tomatoes. The company is currently operating at 82 percent of capacity. Worried about the companys performance, the chief marketing officer is considering dropping the canned sweet peas. If sweet peas are dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the companys total fixed costs would be reduced by 15 percent.

Segmented income statements appear as follows:

	Green Beans	Sweet Peas	Tomatoes
Sales	$ 89,000	$ 129,500	$ 150,700
Variable costs	60,200	114,400	119,300
Contribution margin	$ 28,800	$ 15,100	$ 31,400
Fixed costs allocated to each product line	12,780	20,340	30,360
Operating profit (loss)	$ 16,020	$ (5,240)	$ 1,040

Required:

a.Prepare a differential cost schedule.

b. Should Gilbert Canned Produce drop the sweet pea product line?

Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.)

	Status Quo	Alternative: Drop Sweet Peas	Difference
Revenue
Less: Variable costs
Contribution margin
Less: Fixed costs
Operating profit (loss)