${?}^1($Click the icon to view the income statement data.$)$

${?}^2($Click the icon for additional information.$)$

If the company decides to discontinue the product line, what will happen to the company's operating income? Should Creamy Oat discontinue the bran flakes product line?

Begin by preparing a contribution margin income statement for the bran flakes' product line. $($Use a minus sign or parentheses to enter a loss.$)$

Sales revenue

Less: $(1)$

Contribution margin

Less:

Operating income $($loss$)$

Incremental Analysis for Discontinuation Decision

Contribution margin lost if bran flakes is discontinued

Less: Fixed cost savings if bran flakes is discontinued

Operating income

if bran flakes is discontinued

If Creamy Oat discontinued the bran flakes product line, it will $(4)$

income. Therefore, Creamy Oat $(5)$

discontinue this product line.

$1$: Data Table

$2$: More Info

is advertising$)$ will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company.

$(1)$

Cost of goods sold

Fixed expenses

Variable expenses

$(2)$

Cost of goods sold

Fixed expenses

Operating expenses

Variable expenses

$(3)$

O lost

gained

gain lose

$(5)$ should not

should