ES-23A Decide whether to discontinue a product line (Learning Objective 4) Top managers of Vermont 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: WN Vermont Flooring Product Line Contribution Margin Income Statement For the Year Product lines Laminate Wood flooring flooring Company Total $ 306,000$ 128,000S 434,000 156,000 82,000 238,000 $ 150,000 $ 46,000S 196,000 7 Sales revenue 8 Less: Variable expenses 9 Contribution margin 10 Less fixed expenses: Manufacturing 12 Marketing and administrative 13 Operating income (loss) 11 75,000 51,000 24,000S 55,000 19,000 (28,000S 130,000 70,000 (4,000) Total fixed costs will not change if the company stops selling laminate flooring, Requirements 1. Prepare an incremental analysis to show whether Vermont Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $28,000 to operating income? Explain. 2. Assume that the company can avoid $32,000 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 commande