Homework Answers
a.
Differential Analysis
Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2)
January 21
Continue King Cola (Alternative 1) Discontinue King Cola ( Alternative 2) Differential effect ( Alternative 2) Revenues $ 234000 $ 0 - $ 234000 Costs : Variable cost of goods sold - 94830 * 0 94830 Variable operating expenses - 117450 ** 0 117450 Fixed costs - 41720 *** - 41720 0 Income (loss) - $ 20000 - $ 41720 - $ 21720 * ( 1 - 13%) * $109000 ** ( 1 - 19% ) * $145000 *** ( 13% * $109000) + ( 19% * $145000)b. King cola should be retained . As indicated by the differential analysis in part (a) , the income would decrease by $21720 if the product were discontinued.
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