Managerial Accounting: E9-2 A condensed income statement by product line for British Beverage

Managerial Accounting Ex9-2 Differential Analysis Report for Discontinued Operations A condensed income statement by product line for British Beverage, Inc. indicated the following for Royal Cola for the past year: Sales 254,000 Cost of goods sold 122,000 Gross profit 132,000 Operating expenses 156,000 Loss from operations (24,000) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 20% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. 
a. Prepare a differential analysis report, dated March 3, 2010, for the proposed discontinuance of Royal Cola. b. Should Royal Cola be retained? Explain.
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