: Wuestion Help Suppose Wheatum is considering discontinuing its mallow charms product line. Assume that during the past year, the mallow charms' product line income statement showed the following: Click the icon to view the income statement data.) (Click the icon for additional information. If the company decides to discontinue the product line, what will happen to the company's operating income? Should Wheatum discontinue the mallow charms product line? Begin by preparing a contribution margin income statement for the mallow charms' product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue Less: D Contribution margin Less: Operating income (loss) Prepare an incremental analysis to show how the discontinued mallow charms product line will affect Wheatum's operating income. (Enter a "0" in an input box if there is no expected change as a result of discontinuing mallow charms.) Incremental Analysis for Discontinuation Decision Contribution margin lost if mallow charms is discontinued Less: Fixed cost savings if mallow charms is discontinued Operating income if mallow charms is discontinued If Wheatum discontinued the mallow charms product line, it will income. Therefore, Wheatum V discontinue this product line. Sales revenue $ 7,650,000 6,350,000 Less: Cost of goods sold Gross profit Less: Operating expenses Operating income (loss) 1,300,000 1,500,000 $ (200,000) Print Done Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the mallow charms line is just one of the company's cereal operations, only $730,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company