Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year:

Sales$15,000,000
Cost of goods sold(10,800,000)
Gross profit$4,200,000
Operating expenses(8,000,000)
Operating loss$(3,800,000)
It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola
February 29
Continue
Mango Cola
(Alternative 1)Discontinue
Mango Cola
(Alternative 2)Differential
Effects
(Alternative 2)
Revenues$$$
Costs:
Variable cost of goods sold
Variable operating expenses
Fixed costs
Profit (Loss)$$$