Top managers of Pennsylvania 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: (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 Pennsylvania Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $36,000 to operating income? Explain. (Enter a "O" in an input field it there is no expected change as a result of discontinuing the laminate flooring product in this scenario) Incremental Analysis for Discontinuation Decision Contribution margin lost if laminate flooring product line is dropped Less: Fixed cost savings if laminate flooring product line is dropped Operating income if laminate flooring is dropped Total Data table 2 3 4 Product Line Contribution margin income Statement For the Year - X ering dr p make Product lines Laminate 5 Wood flooring flooring Company Total 6 Sales revenue $ 303,000 $ 130,000 $ 433,000 7 Less: Variable expenses 151,000 88,000 239,000 8 Contribution margin $ 152,000 $ 42,000 $ 194,000 discontin 9 Less fixed expenses: ne? Expla ing product 10 Manufacturing 79,000 59.000 138,000 11 Marketing and administrative 52,000 19,000 71,000 12 Operating income (loss) $ 21,000 $ (36,000) $ (15.000) Print Done Check an I < Requirements 1. Prepare an incremental analysis to show whether Pennsylvania 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 $39,000 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 (Jetailers want to buy both from the same supplier). Wood flooring production and sales would decline 10%. What should the company do? tinu blair ict