Suppose Smiley O is considering discontinuing its special oats product line. Assume that during the past year, the special oats' product line income statement showed the following: E (Click the icon to view the income statement data.) (Click the icon for additional information.) i More Info If the company decides to discontinue the product line, what will happen to the company's operating income? Should Smiley O - X Begin by preparing a contribution margin income statement for the special oats' product line. (Use a minus sign or parentheses Sales revenue $ 5,250,000 Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the special oats line is just one of the company's cereal operations, only $720,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company. Less: Variable expenses 4,690,000 Contribution margin $ 560,000 2,910,000 Less: Fixed expenses Print Done $ (2,350,000) Operating income (loss) B Prepare an incremental analysis to show how the discontinued special oats product line will affect Smiley O's operating income. of discontinuing special oats.) 1 Sales revenue $ 5,250,000 Total Incremental Analysis for Discontinuation Decision Contribution margin lost if special oats is discontinued 2 Less: Cost of goods sold 6,300,000 560,000 3 Gross profit Less: Fixed cost savings if special oats is discontinued Operating income gained if special oats is discontinued (1,050,000) 1,300,000 4 Less: Operating expenses 5 Operating income (loss) $ (2,350,000) Print Done Choose from any list or enter any number in the input fields and then click Check