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Structuring a Keep-or-Drop Product Line Problem with Complementary Effects Shown below is a segmented income statement for Hickory Compony's three wooden flooring product lines: Hickory's management is deciding whiether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution maroin of $50,000 (sales of $300,000 less total variable costs of $250,000 ). All variable costs are relevant. Relevant fixed costs associated with this line include 80% of parquet's machine rent and ali of parquet's supervision sataries. In addition, assume that dropping the parquet product line would reduce saies of the strip line by 29% and sales of the plank line by 20%. All other information remains the same. Hickory's manugement is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250,000 ). All variable costs are relevant. Relevant fixed costs associated with this line include 80% of parquet's machine rent and all of parquet's supervision salaries, in addition, assume that dropping the parquet product line would reduce sales of the strip line by 29% and sales of the plank line by 20%. All other information remains the same. Requiredt 1. If the parquet product line is dropped, what is the contribution margin for the strip line? For the plank line? 1. 2. Which aiternative (keep or drop the parquet product line) is now more cost effective and by how much? by $ x

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