Top managers of Texas 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: K (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling laminate flooring. Read the requirements. C.. Requirement 1. Prepare an incremental analysis to show whether Texas Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $26,000 to operating income? Explain. (Enter a "0" in an input field 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 X Less: Fixed cost savings if laminate flooring product line is dropped Data table Operating income if laminate flooring is dropped A B C D 1 Texas Flooring Requirements 2 Product Line Contribution Margin Income Statement 3 For the Year 4 1. Prepare an incremental analysis to show whether Texas Flooring should discontinue the laminate flooring Product lines product line. Will discontinuing laminate flooring add $26,000 to operating income? Explain. Laminate 2. Assume that the company can avoid $27,000 of fixed expenses by discontinuing the laminate flooring product 5 Wood flooring flooring Company Total line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis 6 Sales revenue 300,000 $ 126,000 $ 426,000 to show whether the company should stop selling laminate flooring. 7 Less: Variable expenses 158,00 88,000 246,000 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 8 Contribution margin $ 142,000 $ 38,000 $ 180,000 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? 9 Less fixed expenses: 10 Manufacturing 78,000 53,000 131,000 11 Marketing and administrative 57,000 11,000 68,000 $ 7,000 $ (26,000) $ (19,000) Print Done 12 Operating income (loss) odf Show All X