Suppose Better Harvest is considering discontinuing its mallow charms product line. Assume that during the past year, the mallow charms' product line income statement showed the following:

View the income statement data.

View the additional information.

If the company decides to discontinue the product line, what will happen to the company's operating income? Should Better Harvest discontinue the mallow charms product line?

Begin by preparing a contribution margin income statement for the mallow charms' product line. $($Use a minus sign or parentheses to enter a loss.$)$

Sales revenue

Less: Variable expenses

Contribution margin

Less: Fixed expenses

Operating income $($loss$)$

Prepare an incremental analysis to show how the discontinued mallow charms product line will affect Better Harvest's operating income. $($Enter a $"0"$ in an input field if there is no expected change as a result of discontinuing mallow charms.$)$

Incremental Armilysis for Discontinuation Decision

Total

Contribution margin lost if mallow charms is discontinued

Less: Fixed cost savings if mallow charms is discontinued

Operating income

If mallow charms is discontinued

If Better Harvest discontinued the mallow charms product line, it will income. Therefore, Better Harvest discontinue this product line.