Product Line Decision. The following monthly segmented income statement is for Durango Company.

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Management is concerned about the losses associated with product line A and is considering dropping this product line. Allocated fixed costs are assigned to product lines based on sales. If product line A is eliminated, total allocated fixed costs are assigned to the remaining product lines, and all variable and direct fixed costs for product line A will be eliminated.

Required:

Perform differential analysis using the format presented in Figure $4\mathrm{.}6$Product Line Differential Analysis for Barbeque Company$.$ Assume keeping all product lines is Alternative $1,$ and dropping product line A is Alternative $2.$

Which alternative is best? Explain.

Summarize the result of dropping product line A using the format presented in Figure $4\mathrm{.}7$Summary of Differential Analysis for Barbeque Company$.$

Explain why the loss shown for product line A in the segmented income statement might be misleading to management.