The condensed product-line income statement for Suffolk China Ware Company for the month of December is as follows:

Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.
(a) Prepare a differential analysis report for all three products for December, 2010.
(b) Should the Cups line be retained?Explain.

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Suffolk China Ware Company Product-Line Income Statement For the Month Ended December 31, 2010 Bowls Plates Cups Sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations $54,000 $68,500 31,700 $36,800 $24,500 22,400 $31,600 28,300 $12,600 20,400 $ (7,800) $ 3,300 $11,500