5. Top managers of California Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the following analysis to help make this decision: (1Click the icon to view the analyeis.) Total flxed costs will not change if the compary stops selling laminate flooring. Read the requirements 2. Rioquirement 1. Prepare an incremental analysis to show whether Calfornia Flooring should discontinue the laminate flooring product line. Wil discontinuing laminate flooring add $30,000 to operating income? Explain. (Enter a "o" in an input field if there is no expected change as a result of decontinuing the laminate flooring product in this scenario.) Decision: (2) It is (3) to conclude that dropping laminate flooring would add $30,000 to operating income. if the company discontinues the laminate flooring product line, it (4) incur fiwed expenses allocated to laminate flooring. Requirement 2. Assume that the company can avoid $34,000 of fiwed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring. (Enter a 0% in an input field if there is no expected change as a result of discontinuing the laminate flooring in this scenario.) Decision: ( (6) because, assuming $34,000 of fued expenses attrbutable to the laminate flooring product line can be avaided, the loss of contribution margin (7) the fioed cost savings. Roquirement 3. Now, assume that all of the fored costs assigned to laminate flooring are direct fored costs and can be avoided it the company stops selling laminate flooring. However, marketing has concluded that wood flooring sales would be adversely affected by discontinuing the laminate flooring line (retailers want to buy both from the same supplier). Wood flooring production and sales would decline 10\%. What should the company do? Prepace an incremental analysis. (Enter a O% in an input field if there is no expected change as a result of discontinuing the laminate flooring line in this soenario.) Decieion: (9 because, assuming that all foxed costs assigned to the laminate flooring product line can be avoided but that wood flooring production and sales would decline 10\%, the loss of contribution margin (10) the fured cost savings. 1. Prepare an incremental analysis to show whether Calfornia Flooring should discontinue the laminate flooring product line. Wil discontinuing laminate flooring add $30,000 to operating income? Explain. 2. Assume that the company can avoid $34,000 of fxed expenses by discontinuing the laminate flooring product line (these costs ace direi fored costs of the laminate flooring product line). Prepare an incremental analysis to show whether the compary should stop seling laminate flooring. 3. Now, assume that all of the fixed costs assigned to laminate flooring are drect fixed costs and can be avoided if the compary stops selling laminate flooring. However, markeing has concluded that wood flooring sales would be adversely allected by discontinuing the laminate flooring line (retailers want to buy both from the same supplier). Wood flooring production and sales would decline 10 . What should the company do
