Homework: Chapter 8 Homework core: 0 of 3 pts 6 of 9 (2 complete) HW Score: E8-23A (similar to) E QUE Top managers of Rhode Island 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 decis (Click the icon to view the analysis) Total fixed costs will not change it the company stops selling laminate flooring, Read the requirements Requirement 1. Prepare an incremental analysis to show whether Rhode Island Flooring should discontinue the laminate flooring product line. Wil decentruing laminate flooring add $2,000 to operating income? Explain. (Enter box if there is no expected change as a result of discontinuing the laminate flooring product in this scenario) Incremental Analysis for Discontinuation Decision Total Contribution margin tot i laminate flooring product ine in dropped Les Freed cost savings aminate flooring product line is dropped Operating income ir laminate flooring in dropped olling laminat - X Data Table gade ow whether tinuing the la Decision ne is dropped ne is dropped flooring is drog Rhode Island Flooring Product Line Contribution Margin Income Statement For the Year Product lines Wood flooring Laminate flooring Company Total 300,000 $ 136,000 $ 436,000 151,000 88,000 239,000 149,000 $ 48,000 $ 197.000 Sales revenue Less: Variable expenses Contribution margin Less fixed expenses: Manufacturing Marketing and administrative 76,000 54.000 55,000 15,000 131,000 69,000 $ 19,000 $ (22,000) $ (3.000) Operating income (loss) Print Done se Input fields and then click Check Answer. air operating losses. They ng laminate flooring. whether Rhode Island Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $2 - X Requirements dr so arin 1. Prepare an incremental analysis to show whether Rhode Island Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $22,000 to operating income? Explain. 2. Assume that the company can avoid $27,000 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 ut fields and then click Check
