Show All Your Works For Your Answer: Calculate: Wood flooring contribution margin lost if laminate flooring product line is dropped Fixed cost savings if laminate flooring product line is dropped In Requirement 3 Requirement 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? Prepare an incremental analysis. (Enter a "0" in an input box if there is no expected change as a result of discontinuing the laminate flooring line in this scenario.) Incremental Analysis for Discontinuation Decision Laminate flooring contribution margin lost if laminate flooring product line is dropped Wood flooring contribution margin lost if laminate flooring product line is dropped Total 54,000 $ Less: Fixed cost savings if laminate flooring product line is dropped Operating income gained if laminate flooring is dropped | Data Table Maine Flooring 1 Requirements Product Line Contribution Margin Income Statement For the Year Product lines Sales revenue 1. Prepare an incremental analysis to show whether Maine Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $20,000 to operating income? Explain. 2. Assume that the company can avoid $23,000 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? Wood flooring Laminate flooring Company Total 302,000 $ 132,000 $ 434,000 150,000 78,000 228,000 Less: Variable expenses Contribution margin $ 152,000 $ 54,000 $ 206,000 Less fixed expenses: Manufacturing 79,000 55,000 18,000 $ 61,000 13,000 140,000 68,000 Marketing and administrative Print Done $ (20,000) $ (2,000) Operating income (loss)