STRUCTURING A KEEP-OR-DROP PRODUCT LINE PROBLEM WITH COMPLEMENTARY EFFECTS Refer to Hickory Company’s segmented income statement in Cornerstone Exercise 23-16. Assume that dropping the parquet product line would reduce sales of the strip line by 25 percent and sales of the plank line by 20 percent. All other information remains the same.

Required:

. If the parquet product line is dropped, what is the contribution margin for the strip line? For the plank line?

. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much?

Cornerstone Exercise