Top managers of Rhode Island 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 Rhode Island Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $19,000 to operating income? Explain. (Enter a "O" in an input fleld if there is no expected change as a result of discontinuing the laminate flooring product in this scenario.) Incremental Analysis for Discontinuation Decision Total Contribution margin lost if laminate flooring product line is dropped Data Table Less: Fixed cost savings if laminate flooring product line is dropped Operating income if laminate flooring is dropped A B D * Requirements 1 Rhode Island Flooring 2 Product Line Contribution Margin Income Statement 3 For the Year 1. Prepare an incremental analysis to show whether Rhode Island Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $19,000 to operating income? Explain. 4 Product lines 2. Assume that the company can avoid $20,000 of fixed expenses by discontinuing the laminate flooring Laminate product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental 5 Wood flooring flooring Company Total analysis to show whether the company should stop selling laminate flooring. 6 Sales revenue S 304,000 $ 130,000 $ 434.000 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 7 Less: Variable expenses 156,000 74,000 230.000 sales would be adversely affected by discontinuing the laminate flooring line (retailers want to buy both from S 8 Contribution margin 148,000 $ 56,000 $ the same supplier). Wood flooring production and sales would decline 10%. What should the company do? 204.000 9 Less fixed expenses: 10 79,000 Manufacturing 62,000 Print 141.000 Done 11 Marketing and administrative 54,000 13,000 67,000 6 parts Clear All S remaining 12 Operating income (loss) 15,000 $ (19.000) $ (4,000)