A condensed income statement by product line for Canadian Beverage Inc. indicated the following for Lemon Mist for the past year:
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a condensed income statement by product line for canadian beverage inc indicated the 647812
Cost of goods sold
Loss from operations
It is estimated that 23% of the cost of goods sold represents fixed factory overhead costs and that 27% of the operating expenses are fixed. Since Lemon Mist is only one of many products, the fixed costs will not be materially affected if the product is discontinued.
a. Prepare a differential analysis report, dated January 3, 2008, for the proposed discontinuance of Lemon Mist.
b. Should Lemon Mist be retained? Explain.
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