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  3. suppose k-log is considering discontinuing its tas

Suppose K-Log is considering discontinuing its tasty loops product line. Assume that during the past...

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Accounting

Suppose K-Log is considering discontinuing its tasty loops product line. Assume that during the past year, the tasty loops' product line income statement showed the following:
View the income statement data.
View the additional information.
If the company decides to discontinue the product line, what will happen to the company's operating income? Should K - Logdiscontinue the tasty loopsproduct line?
Begin by preparing a contribution margin income statement for the tasty loops' product line. (Use a minus sign or parentheses to enter a loss.)
Sales revenue
Less:
Contribution margin
Less:
Operating income (loss)
Additional information
Fixed manufacturing overhead costs account for \(40\%\) of the cost of goods, while only \(30\%\) of the operating expenses are fixed. Since the tasty loops line is just one of the company's cereal operations, only \(\$ 780,000\) 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.
Income statement data
image

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