Top managers of New York Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the following analysis to help make this decision: E (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling laminate flooring. Read the requirements. Requirement 1. Prepare an incremental analysis to show whether New York Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $19,000 to operating income? Explain. Discontinuing laminate flooring will cause operating income to Decision: It is to conclude that dropping laminate flooring would add $19,000 to operating income. If the company discontinues the laminate flooring product line, it incur fixed expenses allocated to laminate flooring. Requirement 2. Assume that the company can avoid $20,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring. (Enter a "0" in an input field if there is no expected change as a result of discontinuing the laminate flooring in this scenario.) Discontinuing laminate flooring and avoiding $20,000 of fixed expenses, will cause operating income to i Requirements 1. Prepare an incremental analysis to show whether New York Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $19,000 to operating income? Explain. 2. Assume that the company can avoid $20,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring. 3. Now, assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can be avoided if the company stops selling laminate flooring. However, marketing has concluded that wood flooring sales would be adversely affected by discontinuing the laminate flooring line (retailers want to buy both from the same supplier). Wood flooring production and sales would decline 10%. What should the company do? Print Done X Data Table A D 1 New York Flooring N Product Line Contribution Margin Income Statement 3 4 5 For the Year Product lines Laminate Wood flooring flooring Company Total $ 300,000 $ 134,000 $ 434,000 155,000 78,000 233,000 6 Sales revenue 7 Less: Variable expenses $ 145,000 $ 56,000 $ 201,000 8 Contribution margin 9 Less fixed expenses: 10 Manufacturing 11 Marketing and administrative 75,000 58,000 62,000 13,000 137,000 71,000 $ 12,000 $ (19,000) $ (7,000) 12 Operating income (loss) Print Done