Suppose Tasty Tart is considering discontinuing its mallow charms product line. Assume that during the past year, the mallow charms' product line income statement showed the following: (Click the icon to view the income statement data.) i (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 Tasty Tart 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.) S 5,300,000 Sales revenue Less: Variable expenses Contribution margin Less: Fixed expenses Operating income (los) - X Data table More info A B $ 5,300,000 6,450,000 Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the mallow charms line is just one of the company's cereal operations, only $775,000 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 2 Less: Cost of goods sold 3 Gross profit 4 Less: Operating expenses (1,150,000) 1,550,000 $ 2,700,000) 5 Operating income (loss) Print Done