(LO 44) 448. Dropping Product Lines 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 compa ny's performance, the company president is considering dropping the Strawberry flavor. Ir 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 20 percent. Segmented income statements appear as follows: Product Sales Variable costs……. Contribution margin ………. Fixed costs allocated to each product line… Operating profit (loss). Original $65,200 44,000 $21,200 9,400 $11.800 Strawberry $85,600 77,200 $ 8,400 12,000 $ (3,600) Orange $102,400 80,200 $ 22,200 14,200 $ 8,000 Required Prepare a differential cost schedule like the one in Exhibit 4.8 to indicate whether Cotrone should drop the Strawberry product line. 10
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