Reference no: EM133052724

Question - A condensed income statement by product line for Celestial Beverage Inc. indicated the following for Star Cola for the past year:

Sales $388,400

Cost of goods sold 186,600

Gross profit $201,800

Operating expenses 250,100

Loss from operations $ (48,300)

It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 26% of the operating expenses are fixed. Because Star Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

Required -

A. Prepare a differential analysis dated January 21 to determine whether Star Cola should be continued (Alternative 1) or discontinued (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.

B. Should Star Cola be retained? Explain.