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.) 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 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 Oat's operating income. (Enter a "0" in an input box if there is no expected change as a result of discontinuing COCO crispies.) Incremental Analysis for Discontinuation Decision Contribution margin lost if coco crispies is discontinued Less: Fixed cost savings if coco crispies is discontinued Operating income (3) if coco crispies is discontinued If Creamy Oat discontinued the coco crispies product line, it will (4) 1: Data Table Total income. Therefore, Creamy Oat (5) Sales revenue Less: Cost of goods sold Gross profit Less: Operating expenses. Operating income (loss) discontinue this product line. $ 5,250,000 6,100,000 $ (850.000) 1,300,000 (2,150,000) 2: 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 coco crispies line is just one of the company's cereal operations, only $730,000 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) O O Cost of goods sold O Fixed expenses O Operating expenses O Variable expenses. (2) O O Cost of goods sold O Fixed expenses O Operating expenses O Variable expenses (3) O O gained Olost (4) O lose. O gain (5) O should not O should