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Top managers of Ohio Flooring are alamed by their operating losses. They are considering dropping the laminate flooring product Ine. Company accountants have prepared the following analysis to help make this decision: (Click the loon to view the analysis.) Total fixed costs will not change if the company shop selling terminate flooring Read the requirements Requirement 1. Prepare an incremental analysis to show whether Ohio Mooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add 516,000 to operating como? Explain (intera o in an input fold there no expected change as a result of continuing the laminate flooring product in this scenario Incremental Analysis for Discontinuation Decision Total Contribution margin kost laminate flooring product line dropped Less: Fored cost savings aminate flooring product line is dropped Operating income Flaminate flooring is dropped A B minate flooring add 1 Ohio Flooring 2 Product Line Contribution Margin Income Statement 3 For the Year Product lines Laminate 5 Wood flooring flooring Company Total 6 Sales revenue S 305,000 $ 128,000 $ 433,000 7 Less: Variable expenses 158,000 74,000 232,000 8 Contribution margin $ 147,000 $ 54,000 $ 201,000 9 Less fixed expenses: 10 Manufacturing 78,000 53,000 131,000 11 Marketing and administrative 55,000 19,000 74.000 12 Operating income (loss) 14,000 $ (18,000) (4,000) $ bl Print Done Check fa ke ato 1. Prepare an incremental analys/s to show whether Ohio Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $18,000 to operating income? Explain. 2. Assume that the company can avoid $21,000 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. 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

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