Question
Suppose is considering discontinuing its product line. Assume that during the past year, the product line income statement showed the following: If the company decides
Suppose is considering discontinuing its product line. Assume that during the past year, the product line income statement showed the following: If the company decides to discontinue the product line, what will happen to the company's operating income? Should discontinue the product line? Begin by preparing a contribution margin income statement for the product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue Less: Contribution margin Less: Operating income (loss) Prepare an incremental analysis to show how the discontinued product line will affect 's operating income. (Enter a "0" in an input field if there is no expected change as a result of discontinuing .) Incremental Analysis for Discontinuation Decision Total Contribution margin lost if yummy pebbles is discontinued Less: Fixed cost savings if yummy pebbles is discontinued Operating income if yummy pebbles is discontinued If discontinued the product line, it will lose gain income. Therefore, should should not discontinue this product line.
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