A condensed income statement by product line for Celestial Beverage Inc. indicated the following for Star Cola
Question:
A condensed income statement by product line for Celestial Beverage Inc. indicated the following for Star Cola for the past year:
sales 290,000
Cost of goods sold 155,000
Gross profit 135,000
operating expense 207,000
loss from operations (72,000)
It is estimated that 12 % of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Since Star Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.
Prepare a differential analysis, dated March 3, 2014, to determine whether Star Cola should be continued (Alternative 1) or discontinued (Alternative 2).
Should Star Cola be retained? Explain.
Accounting Principles
ISBN: 978-0470534793
10th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso