Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. 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 Original Strawberry OrangeSales $ 33,300 $ 42,400 $ 50,900 Variable costs 23,310 38,160 40,720 Contribution margin $ 9,990 $ 4,240 $ 10,180 Fixed costs allocated to each product line 4,600 6,400 7,800 Operating profit (loss) $ 5,390 $ (2,160 ) $ 2,380 Required:a. Prepare a differential cost schedule. Status Quo Alternative:DropStrawberryDifferenc e (all lower underthe alternative)Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss) b. Should Cotrone drop the Strawberry product line?YesNo
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Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. Company is...
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