Suppose Smithers Company is considering discontinuing its organic dried fruit product line. Assume that during the past year, the organic dried fruit's product line income statement showed the following: (Click the icon to view the income statement data.) A (Click the icon for additional information.) If the company decides to discontinue the product line, what will happen to the company's operating income? Should Smithers Company discontinue the organic dried fruit product line? Begin by preparing a contribution margin income statement for the organic dried fruit's product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue $ 5,200,000 4,950,000 Less: Variable expenses Contribution margin $ 250,000 Less: Fixed expenses 3,050,000 $ (2,800,000) Operating income (loss) Prepare an incremental analysis to show how the discontinued organic dried fruit product line will affect Smithers Company's operating income. (Enter a "0" in an input field if there is no expected change as a result of discontinuing organic dried fruit.) Total Incremental Analysis for Discontinuation Decision Contribution margin lost if organic dried fruit is discontinued Less: Fixed cost savings if organic dried fruit is discontinued Operating income if organic dried fruit is More Info Data Table B Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the organic dried fruit line is just one of the company's fruit operations, only $750,000 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. 1 Sales revenue $ 5,200,000 2 Less: Cost of goods sold 6,500,000 3 Gross profit (1,300,000) 4 Less: Operating expenses 1,500,000 Print Done 5 Operating income (loss) $ (2,800,000)