Top managers of New York Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product ine. Company accountants have prepared the following analysis to help make this decision Cick the icon to view the analysis Total fed costs will not change of the company stop seling taminate flooring Read the real Requirement 1. Prepare an incremental anwysin to show whether New York Flooring should discontinue the laminate flooring product line Wiscontinuing Laminate flooring add 335.000 to operating income? Explan Enter aninou edif there are expected change result of discontinuing the laminate flooring product in this scenario Incremental Analysis for Discontinuation Decision Total Contribution maron ostaminate flooring production dropped Lossed cost savings i minate flooring product inen drapped Operating income ninate flooring in dropped Data Table B A N 5 1 New York Flooring Product Line Contribution Margin Income Statement 3 For the Year 4 Product lines Laminate Wood flooring flooring Company Total 6 Sales revenue $ 302.000 $ 118,000 $ 420,000 7 Less: Variable expenses 156,000 80,000 236,000 8 Contribution margin $ 146,000 $ 38,000 $ 184,000 9 Less fixed expenses: 10 Manufacturing 78,000 61,000 139,000 11 Marketing and administrative 54.000 13,000 67,000 $ 12 Operating income (loss) 14.000 $ (36,000) $ (22,000) $ Print Done - X Requirements 1. Prepare an incremental analysis to show whether New York Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $36,000 to operating income? Explain 2. Assume that the company can avoid $37,000 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