The condensed product-line income statement for Dinner Ware Company for the month of August is as follows:

Fixed costs are 40% of the cost of goods sold and 18% of the selling and administrative expenses. Dinner Ware assumes that fixed costs would not be significantly affected if the Cups line were discontinued.
a. Prepare a differential analysis report for all three products for the month ended August 31, 2012.
b. Should the Cups line be retained?Explain.

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Dinner Ware Company Product-Line Income Statement For the Month Ended August 31, 2012 Bowls Plates $2,350,000 1,400,000 $ 950,000 Cups $1,500,000 975,000 Sales Cost of goods sold Gross profit Selling and administrative expenses Income (loss) from operations 900,000 600,000 270,000 330,000 S 250,000 780,000 195,000 300,000 $105,000 700,000