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Requirement 2. Assume that the company can avoid $29,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs
Requirement 2. Assume that the company can avoid $29,000 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. (Enter a "0" in an input field 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 if laminate flooring product line is dropped Less: Fixed cost savings if laminate flooring product line is dropped Operating income lost if laminate flooring is dropped Data Table 4 5 Product lines Laminate Wood flooring flooring Company Total $ 302,000 $ 136,000 $ 438,000 6 Sales revenue 7 Less: Variable expenses 158,000 86,000 244,000 8 Contribution margin $ 144,000 $ 50,000 $ 194,000 9 Less fixed expenses: 10 Manufacturing 75,000 61,000 136,000 11 Marketing and administrative 56,000 17,000 73,000 12 Operating income (loss) $ 13,000 $ (28,000) $ (15,000)
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