A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year:

Sales........................................................$235,000
Cost of goods sold...................................110,000
Gross profit............................................$125,000
Operating expenses................................144,000
Loss from operations...........................$ (19,000)

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 King 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, dated March 3, 2012, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2).
b. Should King Cola be retained? Explain.