(Solved):Assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can…

 

Question

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 floor 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?

Required:

Prepare an incremental analysis.

Texas Flooring

Product Line Contribution Margin

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