Exercise $4\mathrm{.}44($Algo$)$ Dropping Product Lines $($LO $4-4)$

Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling $($do$-$it$-$yourself, or DIY$)$

outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes $(36-$Inch, $44-$Inch, and

$54-$Inch$),$ which are designed for various kitchen sizes and cooling requirements. The chief financial officer $($CFO$)$ at Lamothe has been

looking at the segmented income statement for the fan and is concerned about the results for the $36-$inch model.

If the $36-$Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the

company's total fixed costs would be reduced by $25$ percent.

Required:

a$.$ Prepare a differential cost schedule to support your recommendation.

b$.$ Should Lamothe Kitchen and Bath should drop the $36-$Inch model product line?

Complete this question by entering your answers in the tabs below.

Prepare a differential cost schedule to support your recommendation. $($Select option "increase" or "decrease", keeping Status

Quo as the base. Select "none" if there is no effect.$)$