1 2 3 4 6 7 Sales revenue 8 9 A Less cost of goods sold: Variable Fixed Security Systems Product Line Contribution Margin Income Statement For the Year 10 11 Gross profit 12 Less marketing and administrative expenses: 13 Variable $ B $ Product lines Industrial Systems C Company Total 370,000 $ 380,000 $750,000 31,000 250,000 89,000 $ 61,000 Household Systems 45,000 61,000 274,000 $ D 75,000 76,000 311,000 363,000 136,000

\begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline & & A & & B & & C & & D \\ \hline 1 & \multicolumn{8}{|c|}{ Security Systems } \\ \hline 2 & \multicolumn{8}{|c|}{ Product Line Contribution Margin Income Statement } \\ \hline 3 & \multicolumn{8}{|c|}{ For the Year } \\ \hline 4 & & & \multicolumn{4}{|c|}{ Product lines } & & \\ \hline 6 & & & \multicolumn{2}{|c|}{\begin{tabular}{c} Industrial \\ Systems \end{tabular}} & \multicolumn{2}{|c|}{\begin{tabular}{c} Household \\ Systems \end{tabular}} & \multicolumn{2}{|c|}{\begin{tabular}{c} Company \\ Total \end{tabular}} \\ \hline 7 & Sales revenue & & $ & 370,000 & $ & 380,000 & $ & 750,000 \\ \hline 8 & Less cost of g & ods sold: & & & & & & \\ \hline 9 & Variable & & & 31,000 & & 45,000 & & 76,000 \\ \hline 10 & Fixed & & & 250,000 & & 61,000 & & 311,000 \\ \hline 11 & Gross profit & & $ & 89,000 & $ & 274,000 & $ & 363,000 \\ \hline 12 & Less marketin & and admi & & & & & & \\ \hline 13 & Variable & & & 61,000 & & 75,000 & & 136,000 \\ \hline \end{tabular} Members of the board of directors of Security Systems have received the following operating income data for the year just ended: (Click the icon to view the operating income data.) Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the company should discontinue the line. Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $79,000 and decrease fixed marketing and administrative expenses by $10,000. Read the equirements. Requirement 1. Prepare an incremental analysis 16 show whether Security Systems should discontinue the industrial systems product line. Requirements 1. Prepare an incremental analysis to show whether Security Systems should discontinue the industrial systems product line. 2. Prepare contribution margin income statements to show Security Systems' total operating income under the two alternatives: (a) with the industrial systems line and (b) without the line. Compare the difference between the two alternatives' income numbers to your answer to Requirement 1. What have you learned from this comparison