Decide whether to discontinue a product line (Learning E8-23A Objective 4) Top managers of Vermont Flooring are alarmed by their operating losses. They are con- sidering dropping the laminate flooring product line. Company accountants have pre- pared the following analysis to help make this decision: Vermont Floorin Product Line Contribution Margin Income Statement For the Year Product lines nate Wood flooring flooring Company Total S 306,000 S 128000 $ 434,000 156,00082,000238000 150,0005 46,000S 196,000 Sales revenue 8 Less: Variable expenses 9 Contribution margin 10 Less fixed expenses: 11 Manufacturing 12 Marketing and administrative 75,000 55,000 130,000 51,000 19,000 70,000 24,000 5 (28,000)5 (4,000] 13 Operating income (loss) 14 Total fixed costs will not change if the company stops selling laminate flooring. Requirements 1. Prepare an incremental analysis to show whether Vermont Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $28,000 to operating income? Explain. Assume that the company can avoid $32,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminat 2. fooring product line). Prepare an incremental analysis to show whether the com should stop selling laminate flooring. Now, assume that all of the fixed costs assigned to laminate flooring are direct costs and can be avoided if the company stops selling laminate flooring. However fixed 3. marketing has concluded that wood flooring sales would be adversely a discontinuing the laminate flooring line (retailers want to buy both from the sam ffected by sup er). Wood flooring production and sales would decline 10% What should the con- pahy do