1 More info Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the fruity rings line is just one of the company's cereal operations, only $740,000 of direct fixed costs (the majority of which 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 Data table A B B $ 1 Sales revenue 2 Less: Cost of goods sold 3 Gross profit 4 Less: Operating expenses 5 Operating income (loss) 7,400,000 6,400,000 1,000,000 1,350,000 $ (350,000) Suppose Smiley O is considering discontinuing its fruity rings product line. Assume that during the past year, the fruity rings' product line income statement showed the following: (Click the icon to view the income statement data.) (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 Smiley O discontinue the fruity rings product line? Begin by preparing a contribution margin income statement for the fruity rings product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue Less: Contribution margin Less: Operating income (loss)