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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	$232,400
Cost of goods sold	(112,000)
Gross profit	$120,400
Operating expenses	(143,000)
Operating loss	$(22,600)

It is estimated that 15% of the cost of goods sold represents fixed factory overhead costs and that 22% 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.

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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.

	Continue Mango Cola (Alternative 1)	Discontinue Mango Cola (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank e2657f013fcc05d_1	$fill in the blank e2657f013fcc05d_2	$fill in the blank e2657f013fcc05d_3
Costs:
Variable cost of goods sold	fill in the blank e2657f013fcc05d_4	fill in the blank e2657f013fcc05d_5	fill in the blank e2657f013fcc05d_6
Variable operating expenses	fill in the blank e2657f013fcc05d_7	fill in the blank e2657f013fcc05d_8	fill in the blank e2657f013fcc05d_9
Fixed costs	fill in the blank e2657f013fcc05d_10	fill in the blank e2657f013fcc05d_11	fill in the blank e2657f013fcc05d_12
Profit (Loss)	$fill in the blank e2657f013fcc05d_13	$fill in the blank e2657f013fcc05d_14	$fill in the blank e2657f013fcc05d_15

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b. Should Mango Cola be retained?

YesNo