3. Suppose Creamy Oat is considering discontinuing its coco crispies product line. Assume that during the past year, the coco crispies' 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 Creamy Oat discontinue the coco crispies product line? Begin by preparing a contribution margin income statement for the coco crispies' product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue Less: (1) Contribution margin Less: (2) Operating income (loss) Prepare an incremental analysis to show how the discontinued coco crispies product line will affect Creamy Oal's operating income. (Enter a "O" in an input box if there is no expected change as a result of discontinuing coco crispies.) Incremental Analysis for Discontinuation Decision Total Contribution margin lost if coco crispies is discontinued Less: Fixed cost savings if coco crispies is discontinued Operating income spies s dascontnued if coco crispies is discontinued If Creamy Oat discontinued the coco crispies product line, it will (4) income. Therefore, Creamy Oat (5) discontinue this product line 1: Data Table $5,250,000 6,100,000 (850,000) 1,300,000 $2,150,000) Sales revenue Less: Cost of goods sold Grass profit Less: Operating expenses Operating income (loss) 2: More Info Fxed manufacturing overhead costs account or 40% o he ost o goods while anly 30 o e operating expenses are fixed. Sinoe the coco c spies ne is ust one o he company's cereal operations, only S730 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. OVariable expenses 2) O Variable expenses (3) (4) O lose 5 O should not O should O Cost of goods sold O Fixed expenses O Operating expenses O Cost of goods sold O Fixed expenses OOperating expenses O gained O lost O gain