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Total fixed costs will not change if the company stops selling laminate flooring. Read the requirements. It is to conclude that dropping laminate flooring would
Total fixed costs will not change if the company stops selling laminate flooring.
Read the requirements.
It is to conclude that dropping laminate flooring would add $ to operating income. If the company discontinues the laminate flooring product line, it will still incur fixed expenses allocated to laminate flooring.
Requirement Assume that the company can avoid $ 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 analysi to show whether the company should stop selling laminate flooring. Enter a in an input field if there is no expected change as a result of discontinuing the laminate flooring in this scenario.
Incremental Analysis for Discontinuation Decision
Total
tableIncremental Analysis for Discontinuation Decision,TotalContribution 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 $ of fixed expenses attributable to the laminate flooring product line can be avoided, the loss of contribution margin the fixed cost savings.
Requirement Now, assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can bef 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 What should the company do
Prepare an incremental analysis. Enter a in an input field if there is no expected change as a result of discontinuing the laminate flooring line in this scenario.
Operating income
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 the loss of
Decision: the fixed cost savings.
contribution margin
Analysis
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