I need help on the last requirement... i cant figure out what to put for fixed cost savings. Please Help
CU-2JR 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 Click the icon to view the analysis) Total foxed costs will not change if the company stops selling laminate flooring Read the requirements Requirement 1. Prepare an incremental analysis to show whether Calfornia Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $32,000 to operating income? Explain (Enter 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 Total Contribution margin lost if laminate flooring product line is dropped $ 44,000 Less: Fixed cost savings if laminate flooring product line is dropped Operating income lost if laminate flooring is dropped Decision. Do not drop laminate flooring product line! S 44.000 It is incorrect to conclude that dropping a nd flooring would add $32,000 to operating income. If the company discontinues the laminate flooring product line, it will still incur fixed expenses allocated to laminate flooring Requirement 2. Assume that the company can avoid $36.000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct foxed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring (Enter a "oin an input box if there is no expected change as a result of discontinuing the laminate flooring in this scenario) Incremental Analysis for Discontinuation Decision Total Contribution margin lost it laminate flooring product line is dropped 44,000 Less Fixed cost savings if laminate flooring product Ine is dropped 38.000 Operating income lost if laminate flooring is dropped Decision. Do not drop the liminate floor product line because, assuming $36,000 of fixed expenses attributable to the laminate flooring product line can be avoided, the loss of contribution margin will still exceed the foxed cost savings Requirement 3. Now, assume that 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? Prepare an incremental anses (Enter a "U" in an input box if there is no expected change as a result of discontinuing the laminate flooring line in this sconario) Incremental Analysis for Discontinuation Decision Laminate flooring contribution margin ostaminate flooring product line is dropped Wood flooring contribution margin lost it laminate flooring product line is dropped Less Fixed cost savings if laminate flooring product line is dropped Operating income W i laminate flooring is dropped Total 44000 14400 Data Table ninate se cos floorin California Flooring Product Line Contribution Margin Income Statement For the Year Product lines Sales revenue Wood flooring Laminate flooring Company Total $ 303,000 $ 118,000 $ 421,000 159,000 74,000 233,000 144,000 S 44,000 $ 188,000 pring p Less: Variable expenses Contribution margin Less fixed expenses Manufacturing Marketing and administrative Operating income (loss) 70,000 53,000 21,000 S 57,000 19,000 127,000 72,000 (11,000) pmpany Je floori (32,000) $ boring Print Done bro fion margin lost if laminate flooring product line is dropped 14400 ur fixed expenses allocated to laminate flooring. f Requirements - Xs ar (E 1. Prepare an incremental analysis to show whether California Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $32,000 to operating income? Explain 2. Assume that the company can avoid $36,000 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 stop glir
