Top managers @ Ohio flooring are alarmed by operating losses, should they drop the laminate flooring line?

Flooring.pdf X + Top managers of Ohio 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: B (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling laminate flooring. Read the requirements C O File C:/Users/jessi/Desktop/Ohio%20Flooring.pdf + A' Read aloud Draw Highlight Requirement 1. Prepare an incremental analysis to show whether Ohio Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $28,000 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.) Total 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 A B D Decision: It is V to conclude that dropping laminate flooring would add $28,000 to operating income. If the company discontinues the laminate flooring product line, it incur fixed expenses allocated to laminate flooring. Requirement 2. Assume that the company can avoid $33,000 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. (Enter a "0" in an input field if there is no expected change as a result of discontinuing the laminate flooring this scenario.) Incremental Analysis for Discontinuation Decision Total 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 1 Ohio Flooring 2 Product Line Contribution Margin Income Statement 3 For the Year 4 Product lines Laminate 5 Wood flooring flooring Company Total 6 Sales revenue $ 300,000 $ 118,000 $ 418,000 7 Less: Variable expenses 150,000 84,000 234,000 8 Contribution margin $ 150,000 $ 34,000 $ 184,000 9 Less fixed expenses: 10 Manufacturing 75,000 49,000 124,000 Marketing and administrative 56,000 11 13,000 69,000 19,000 $ (28,000) $ (9,000) 12 Operating income (loss) Decision because, assuming $33,000 of fixed expenses attributable to the laminate flooring product line can be avoided, the loss of contribution margin the fixed cost savings. Requirement 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? Prepare an incremental analysis. (Enter a "0" in an input field if there is no expected change as a result of discontinuing the laminate flooring line in this scenario.) Incremental Analysis for Discontinuation Decision Total Laminate flooring contribution margin lost if laminate flooring product line is dropped Wood flooring 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 Decision because, assuming that all fixed costs assigned to the laminate flooring product line can be avoided but that wood flooring production and sales would decline 10%, the loss of contribution margin the fixed cost savings. Choose from any list or enter any number in the input fields and then continue to the next