Question

: Wuestion Help Suppose Wheatum is considering discontinuing its mallow charms product line. Assume that during the past year, the mallow charms' product line income statement showed the following: Click the icon to view the income statement data.) (Click the icon for additional information. If the company decides to discontinue the product line, what will happen to the company's operating income? Should Wheatum discontinue the mallow charms product line? Begin by preparing a contribution margin income statement for the mallow charms' product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue Less: D Contribution margin Less: Operating income (loss) Prepare an incremental analysis to show how the discontinued mallow charms product line will affect Wheatum's operating income. (Enter a "0" in an input box if there is no expected change as a result of discontinuing mallow charms.) Incremental Analysis for Discontinuation Decision Contribution margin lost if mallow charms is discontinued Less: Fixed cost savings if mallow charms is discontinued Operating income if mallow charms is discontinued If Wheatum discontinued the mallow charms product line, it will income. Therefore, Wheatum V discontinue this product line.

Answer 1

Contributio Inncome Statement
Sales Revnue		$7,650,000.00
Less: Variable Expense
Variable Manufacturing Cost (6350000*60%)	$3,810,000.00
Variable Operating Expense (1500000*70%)	$1,050,000.00	$4,860,000.00
Contribution Margin		$2,790,000.00
Less: Fixed Expense
Manufacturing Cost (6350000*40%)	$2,540,000.00
Operating Expense (1500000*30%)	$450,000.00	$2,990,000.00
Operating Income ( Loss)		-$200,000.00

Part-2
Contribution margin lost if bran flakes is discontinued	$2,790,000
(Less): Fixed cost saving if bran flakes is discontinued	($730,000)
Operating income Lost if barn flakes is discontinued	$2,060,000