The condensed product-line income statement for Blonde Espresso Company is as follows:

Fixed costs are 40% of the cost of goods sold and 18% of the selling and administrative expenses. Blonde Espresso assumes that fixed costs would not be significantly affected if the Dark Roast line were discontinued.

a. Prepare a differential analysis report for all three products.

b. Should the Dark Roast line be retained? Explain.

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BLONDE ESPRESSO COMPANY Product-Line Income Statement Light Medium Dark Roast Roast Roast $ 750,000 $ 487,500 (390,000) $ 97,500 (150,000) $ (52,500) Sales $1,175,000 Cost of goods sold Gross profit (450,000) (700,000) $ 475,000 $ 300,000 Selling and administrative expenses (135,000) (350,000) Operating income (loss) $ 165,000 $ 125,000