Prepare an incremental analysis to show whether

Rhode Island Flooring

should discontinue the laminate flooring product line. Will discontinuing laminate flooring add

$24,000

to operating income? Explain.

2.

Assume that the company can avoid

$27,000

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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