Georgia Flooring Product Line Contribution Margin Income Statement For the Year Product lines Laminate Wood flooring...
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Georgia Flooring Product Line Contribution Margin Income Statement For the Year Product lines Laminate Wood flooring flooring Company Total Sales revenue $ 304,000 $ 126,000 $ 430,000 Less: Variable expenses 153,000 80,000 233,000 Contribution margin $ 151,000 $ 46,000 $ 197,000 Less fixed expenses: Manufacturing 72,000 62,000 134,000 57,000 17,000 74,000 Marketing and administrative $ 22,000 $ (33,000) $ (11,000) Operating income (loss) Requirements 1. Prepare an incremental analysis to show whether Georgia Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $33,000 to operating income? Explain. 2. Assume that the company can avoid $38,000 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? Georgia Flooring Product Line Contribution Margin Income Statement For the Year Product lines Laminate Wood flooring flooring Company Total Sales revenue $ 304,000 $ 126,000 $ 430,000 Less: Variable expenses 153,000 80,000 233,000 Contribution margin $ 151,000 $ 46,000 $ 197,000 Less fixed expenses: Manufacturing 72,000 62,000 134,000 57,000 17,000 74,000 Marketing and administrative $ 22,000 $ (33,000) $ (11,000) Operating income (loss) Requirements 1. Prepare an incremental analysis to show whether Georgia Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $33,000 to operating income? Explain. 2. Assume that the company can avoid $38,000 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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Answer 1 Incremental Analysis to Determine Discontinuation of Laminate Flooring Product Line Without Discontinuing Laminate Flooring Contribution Marg... View the full answer
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