Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and...

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Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. 36 Inch Revenues Variable costs Fixed costs allocated to products $ 387,400 239,600 155,230 44 Inch $ 591,200 293,680 233,464 54 Inch $ 369,000 171,500 146,806 Operating profit (loss) $ (7,430) $ 64,056 $ 50,694 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Revenue Less variable costs Contribution margin Less fixed costs Operating profit Status Quo Alternative: Drop 36-Inch Fan Difference increase increase increase increase increase Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. 36 Inch Revenues Variable costs Fixed costs allocated to products $ 387,400 239,600 155,230 44 Inch $ 591,200 293,680 233,464 54 Inch $ 369,000 171,500 146,806 Operating profit (loss) $ (7,430) $ 64,056 $ 50,694 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Revenue Less variable costs Contribution margin Less fixed costs Operating profit Status Quo Alternative: Drop 36-Inch Fan Difference increase increase increase increase increase