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 $28,000 to operating income? Explain. Discontinuing laminate flooring will cause operating income to Data table Requirements Pennsylvania Flooring Product Line Contribution Margin Income Statement For the Year Product lines Wood flooring Laminate flooring Company Total 306,000 $ Sales revenue $ 124,000 $ 430,000 Less: Variable expenses 151,000 90,000 241,000 Contribution margin $ 155,000 $ 34,000 $ 189,000 Less fixed expenses: Manufacturing 77,000 51,000 128,000 Marketing and administrative 59,000 11,000 70,000 $ 19,000 $ Operating income (loss) (28,000) $ (9,000) 1. Prepare an incremental analysis to show whether Pennsylvania Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $28,000 to operating income? Explain. 2. Assume that the company can avoid $31,000 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 Print Done