Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 46

Dropping Product Lines
Atlantic Soup Company is presently operating at 75 percent of capacity. Worried about the company's performance, the president is considering dropping its clam chowder. If clam chowder 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:

Required
Prepare a differential cost schedule like the one in Exhibit 4.8 to indicate whether Atlantic should drop the clam chowder product line.