The condensed product-line income statement for Porcelain Tableware Company for the month of May is as follows:

Porcelain Tableware Company Product-Line Income Statement For the Month Ended May 31

Bowls Plates Cups

Sales	$65,400			$89,800			$26,300
Cost of goods sold	27,000			33,600			13,900
Gross profit	$38,400			$56,200			$12,400
Selling and administrative expenses	28,700			35,000			16,300
Income from operations	$9,700			$21,200			$(3,900)

Fixed costs are 12% of the cost of goods sold and 37% of the selling and administrative expenses. Porcelain Tableware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis

Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2)

For the Month Ended May 31

	Continue Cups (Alternative 1)	Discontinue Cups (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)

b. Should the Cups line be retained? Explain. ....................................

As indicated by the differential analysis in part (a), the income will ................................................. by $............................... if the Cups line is discontinued.