Exercise 4-49 (Algo) Dropping Product Lines (LO 4-4) Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently operating at 75 percent of capacity. Worried about the company's performance, the company president is considering dropping the Strawberry flavor. If Strawberry is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent. Segmented income statements appear as follows: Product Sales Variable costs Contribution margin Original $33,000 23,100 $ 9,900 Fixed costs allocated to each product line Operating profit (loss) 5,400 $ 4,500 Strawberry $42,200 37,980 $ 4,220 6,000 $(1,780) Orange $51,200 40,960 $10,240 7,000 $ 3,240 Required: a. Prepare a differential cost schedule. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss) Status Quo Alternative: Drop Difference Strawberry b. Should Cotrone drop the Strawberry product line? O Yes No