Show Your Steps How Do You Solve It: Calculate Fixed cost savings if laminate flooring product line is dropped in Requirement 2 Requirement 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. (Enter a "O" in an input box if there is no expected change as a result of discontinuing the laminate flooring in this scenario.) Total 54,000 $ Incremental Analysis for Discontinuation Decision 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 i Data Table - XL laminate flooring product line. Company accountants have prepared the following analysis to help make this Requirements Maine Flooring Product Line Contribution Margin Income Statement For the Year Product lines 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. 12. 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 Sales revenue $ 152,000 $ 54,000 $ 206,000 Less: Variable expenses Contribution margin Less fixed expenses: Manufacturing Marketing and administrative 79,000 55,000 Print Done 61,000 13,000 (20,000) $ 140,000 68,000 (2,000) Operating income (loss)