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Data Table Carolina Flooring Product Line Contribution Margin Income Statement For the Year Product lines Sales revenue Wood flooring Laminate flooring Company Total 305,000 $ 134,000 $ 439,000 154,000 82,000 236,000 Less: Variable expenses Contribution margin 151,000 $ 52,000 $ 203,000 Less fixed expenses: Manufacturing 78,000 58,000 53,000 19,000 131,000 77,000 Marketing and administrative 15,000 $ (20,000) $ (5,000) Operating income (loss) E8-23A (similar to) Question Help Top managers of Carolina 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: (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling laminate flooring. Read the requirements. Requirement 1. Prepare an incremental analysis to show whether Carolina Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $20,000 to operating income? Explain. (Enter a "0" in an input box if there is no expected change as a result of discontinuing the laminate flooring product in this scenario.) Incremental Analysis for Discontinuation Decision 1 Requirements Total Contribution margin lost if laminate flooring product line is dropped Less: Fixed cost savings if laminate flooring product line is dropped Operating income if laminate flooring is dropped 1. Prepare an incremental analysis to show whether Carolina Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $20,000 to operating income? Explain. 2. Assume that the company can avoid $23,000 of fixed 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. 3. Now, assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can be avoided if 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? Print Done