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Differential Analysis for a Discontinued Product A condensed income statement by product line for Crown Beverage Inc. indicated the following for Royal Cola for the past year: Sales $236,300 Cost of goods sold 112,000 Gross profit $124,300 Operating expenses 146,000 Loss from operations (21,700) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 22% of the operating expenses are fixed. Since Royal 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 March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "O". Use a minus sign to indicate a loss Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue Royal Discontinue Royal Differential Effect Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues Costs Variable cost of goods sold Variable operating expenses Food costs Loss from operations $(21,700) It is estimated that 12% of the cost of goods sold represents foxed factory overhead costs and that 22% of the operating expenses are fixed. Since Royal 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 March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue Royal Discontinue Differential Effect on Income Cola (Alternative 1) Cola (Alternative 2) (Alternative 2) Revenues Costs Variable cost of goods sold Variable operating expenses Fored costs Income (1.0) b. Should Star Cola be retained? Explain. As indicated by the differential analysis in part (A), the income would if the product is discontinued