Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is...
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Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently operating at 75 percent of capacity. Worried about the company's performance, the company president is considering dropping the Strawberry flavor. 1 Strawberry is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent. Segmented income statements appear as follows: Product Sales Variable cont Contribution margin Fixed costs allocated to each product line Operating profit (losa) Original $33,000 23, 100 $ 9,900 4.000 $ 5,900 Strawberry $42,900 38,610 $4,290 6.400 $12,110) Orange $51,100 40,880 $10,220 7.000 $ 3,220 Required: a. Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Required: a. Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo Alternative: Drop Strawberry Difference Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss)
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