A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit...

 

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A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year. Sales $12,750,000 Cost of goods sold 8,500,000 Gross profit $4,250,000 6,000,000 Operating expenses Loss from operations $ (1,750,000) It is estimated that 25% of the cost of goods sold represents fixed factory overhead costs and that 15% of the operating expenses are fixed. Because Fruit Co is only one of many products, the fixed costs will not be materially affected if the product is discontinued. Required: a. Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon () will automatically appear if required. b. Should Fruit Cola be retained? Explain. A condensed income statement by product line for Healthy Beverage Inc. indicated the following for Fruit Cola for the past year. Sales $12,750,000 Cost of goods sold 8,500,000 Gross profit $4,250,000 6,000,000 Operating expenses Loss from operations $ (1,750,000) It is estimated that 25% of the cost of goods sold represents fixed factory overhead costs and that 15% of the operating expenses are fixed. Because Fruit Co is only one of many products, the fixed costs will not be materially affected if the product is discontinued. Required: a. Prepare a differential analysis dated January 5 to determine whether Fruit Cola should be continued (Alternative 1) or discontinued (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon () will automatically appear if required. b. Should Fruit Cola be retained? Explain.

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Lets start by preparing the differential analysis to determine whether Fruit Cola should be continued or discontinued Differential Analysis Differenti... View the full answer