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Top managers of Ohio FlooringOhio Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the following

Top managers of
Ohio FlooringOhio Flooring
are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the following analysis to help make this? decision:
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Total fixed costs will not change if the company stops selling laminate flooring.
Read the
requirements
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Requirement 1. Prepare an incremental analysis to show whether
Ohio FlooringOhio Flooring
should discontinue the laminate flooring product line. Will discontinuing laminate flooring add
$ 20 comma 000$20,000
to operating? income? Explain. ?(Enter a? "0" in an input box if there is no expected change as a result of discontinuing the laminate flooring product in this? scenario.)

Incremental Analysis for Discontinuation Decision
Total
Contribution 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

Ohio Flooring
Product Line Contribution Margin Income Statement
For the Year
Product lines


Wood flooring
Laminate flooring
Company Total

Sales revenue
$307,000
$126,000
$433,000

Less: Variable expenses
159,000
78,000
237,000

Contribution margin
$148,000
$48,000
$196,000

Less fixed expenses:




Manufacturing
79,000
59,000
138,000

Marketing and administrative
53,000
9,000
62,000

Operating income (loss)
$16,000
$(20,000)
$(4,000)

Jun 24 2021 View more View Less

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