b. Should Cotrone drop the Strawberry product line? YesNo Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently operating at75 percent of capacity. Worried about the company's performance, the company president is considering dropping the Strawberryflavor. If Strawberry is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, thecompany's total fixed costs would be reduced by 15 percent.Segmented income statements appear as follows:ProductSalesVariable costsIIIOriginal$32,40022,680$ 9,7204,600$ 5,120Strawberry$43,10038,790$ 4,3106,200$(1,890)Orange$50,90040,720$10,1806,900$ 3,280Contribution marginFixed costs allocated to each product lineOperating 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.)Alternative:Status QuoDropStrawberryDifferenceRevenueLess: Variable costsContribution marginLess: Fixed costsOperating profit (loss)

Cost-volume-profit (CVP) analysis is a method of cost accounting that looks at the impact that…

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.) Alternative: Status Quo Drop Strawberry Difference 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.) Alternative: Status Quo Drop Strawberry Difference Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

b. Should Cotrone drop the Strawberry product line?

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
III
Original
$32,400
22,680
$ 9,720
4,600
$ 5,120
Strawberry
$43,100
38,790
$ 4,310
6,200
$(1,890)
Orange
$50,900
40,720
$10,180
6,900
$ 3,280
Contribution margin
Fixed costs allocated to each product line
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.)
Alternative:
Status Quo
Drop
Strawberry
Difference
Revenue
Less: Variable costs
Contribution margin
Less: Fixed costs
Operating profit (loss)

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