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Differential Analysis for a Discortinued Product A candersed income statement by product line for Lavonia...

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Accounting

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Differential Analysis for a Discortinued Product A candersed income statement by product line for Lavonia Beverage Inc. indicated the foliowing for Vim Cola for the bsst yeat: It is estimated that 15 she of the conk of goods sold represents fixed factory overbead costs and that 22 is of the operating expenses are fiaed. Because vin cola is only one of manc products, the fixed costs wili not be matenaly affected if the product is discontinued. a. Piepare a diferentiat ansysis daged November 2 to detecmine whether Vim Cota shoudd be continued (Alternative 1) or divcontinued (auternative 2). If required, use a minas sgn to indicate a kos. b. Should Vim Cola be retained? T Chencus 30 For continue and discontinut alternatives subtract the costs from the revenues, Use percentages to separate variabie from fixed costs, Determine the differential effect in income of the revenues, costs, and income (loss) by subtracting afternative 1 from altemative 2

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