Product Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Original $32,300 22,610 $9,690 4,900 $ 4,790 Strawberry $42,100 37,890 $4,210 6,200 $(1,990) Orange $51,200 40,960 $10,240 6,800 $ 3,440
Product Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Original $32,300 22,610 $9,690 4,900 $ 4,790 Strawberry $42,100 37,890 $4,210 6,200 $(1,990) Orange $51,200 40,960 $10,240 6,800 $ 3,440
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Vinubhai
Transcribed Image Text: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
Fixed costs allocated to each product line
Operating profit (loss)
Revenue
Less: Variable costs
Contribution margin
Less: Fixed costs
Operating profit (loss)
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.)
Status Quo -
+
Alternative:
Drop
Strawberry
Original
$32,300
22,610
$9,690
4,900
$ 4,790
b. Should Cotrone drop the Strawberry product line?
Strawberry
$42,100
37,890
$4,210
6,200
$(1,990)
Orange
$51,200
40,960
$10,240
6,800
$3,440
Difference
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