Thank you will rate Top managers of Alaska Flooring are alar

Thank you will rate!

Top managers of Alaska Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the folowing analysis to help make this decision: EB Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling larminate flooring Read the requirements Requirement 1. Prepare an incremental analysis to show whether Alaska Flooring should discontinue the laminate floor product line. wll discontinuing laminate flooring add $28,000 to operating income? Explain (Enter a \"0 in an input box if there is no expected change as a result of discontinuing the laminate flooring product in this scenario) Incremental Analysis for Discontinuation Decision Total Contribution margin lost if laminate flooring product line is dropped Less: Fixed cost savings if laminate flooring product line is dropped Operating income if laminate flooring is dropped

Solution

Solution 1:

Alaska Flooring should not discontinue the laminate flooring because discontinuing will decrease the operating income by $38,000. Since Fixed cost will continue to occur even if Laminate flooring is discontinued, the operating income will reduce by the contribution margin lost.

Solution 2:

Alaska Flooring should not discontinue the laminate flooring because discontinuing will decrease the operating income by $9,000.

Solution 3:

Company Should discontinue the Laminate flooring since it will increase operating income by $13,600.

Incremental analysis for discontinuing decision
Contribution margin lost if laminate flooring product line is dropped	$38,000.00
Less: Fixed cost saving if laminate flooring product line is dropped	$0.00
Operating Income Decreases if laminate flooring is dropped	$38,000.00