5. Members of the board of directors of Deluxe Safety 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 drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $84,000 and decrease fixed marketing and administrative expenses by $16,000 Requirements Print 1. Prepare an incremental analysis to show whether Deluxe Safety should drop the industrial systems produd... 2. Prepare contribution margin income statements to show Deluxe Safety's 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? Requirement 1. Prepare an incremental analysis to show whether Deluxe Safety should drop the industrial systems product line. Deluxe Safety Incremental Analysis of Dropping a Product Line Expected decrease in revenues: Dropping industrial systems sales Expected decrease in expenses: Variable expenses: Cost of goods sold Marketing and administrative expenses Fixed expenses: Cost of goods sold Marketing and administrative expenses Expected decrease in total expenses Expected decrease in operating income Requirement 2. Prepare contribution margin income statements to show Deluxe Safety's 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? Begin by preparing the statements with and without the industrial systems line, then prepare the contribution margin income statement showing the decrease if the industrial systems line is dropped. (Use parentheses or a minus sign for an operating loss.) Deluxe Safety Total Analysis of Dropping a Product Line Totals With Industrial Systems Totals Without Industrial Systems Decrease If Industrial Systems Is Dropped Sales revenue Varahlo ovnencoe Requirement 2. Prepare contribution margin income statements to show Deluxe Safety's total operating income under the two alternatives: (a) with the industrial systems line and (b) without the line. Compare the difference between the Print alternatives' income numbers to your answer to Requirement 1. What have you learned from this comparison? Begin by preparing the statements with and without the industrial systems line, then prepare the contribution margin income statement showing the decrease if the industrial systems line is dropped. (Use parentheses or a minus sign for an operating loss.) Deluxe Safety Total Analysis of Dropping a Product Line Totals With Industrial Systems Totals Without Industrial Systems Decrease of Industrial Systems Is Dropped Sales revenue Variable expenses: Cost of goods sold Marketing and administrative expense Total variable expenses Contribution margin Fixed expenses: Cost of goods sold Marketing and administrative expense Total fixed expenses Operating income (loss) What have you learned from this comparison? The operating income difference calculated on the total analysis of dropping a product (1) the expected decrease in operating income Deluxe Safety drops the industrial systems product line, as shown in Requirement 1. This demonstrates that the incremental analysis approach in Requirement 1 yields (2) results as the longer approach in Requirement 2 that compares total operating income under the two alternatives. 1: More Info Product Line Industrial Household Systems Systems Total 310,000 $ 330,000 $ 640,000 Sales revenue Print Fixed expenses: Cost of goods sold Marketing and administrative expense Total fixed expenses Operating income (loss) What have you learned from this comparison? The operating income difference calculated on the total analysis of dropping a product line (1) the expected decrease in operating income if Deluxe Safety drops the industrial systems product line, as shown in Requirement 1. results as the longer approach in Requirement 2 that compares total operating income under the two alternatives. This demonstrates that the incremental analysis approach in Requirement 1 yields (2) 1: More Info Product Line Industrial Household Systems Systems Total $ 310,000 $ 330,000 $ 640,000 $ Sales revenue Cost of goods sold: Variable 40,000 $ 220,000 45,000 $ 85,000 68,000 288,000 Fixed 260,000 113,000 373,000 50,000 217,000 267,000 Total cost of goods sold Gross profit.... Marketing and administrative expenses: Variable 64.000 73,000 137,000 71,000 Fixed 47,000 24,000 Total marketing and 111,000 administrative expenses 97,000 208,000 S (61,000) $ Operating income (loss) 120,000 $ 59,000 5. Members of the board of directors of Deluxe Safety 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 drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $84,000 and decrease fixed marketing and administrative expenses by $16,000 Requirements Print 1. Prepare an incremental analysis to show whether Deluxe Safety should drop the industrial systems produd... 2. Prepare contribution margin income statements to show Deluxe Safety's 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? Requirement 1. Prepare an incremental analysis to show whether Deluxe Safety should drop the industrial systems product line. Deluxe Safety Incremental Analysis of Dropping a Product Line Expected decrease in revenues: Dropping industrial systems sales Expected decrease in expenses: Variable expenses: Cost of goods sold Marketing and administrative expenses Fixed expenses: Cost of goods sold Marketing and administrative expenses Expected decrease in total expenses Expected decrease in operating income Requirement 2. Prepare contribution margin income statements to show Deluxe Safety's 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? Begin by preparing the statements with and without the industrial systems line, then prepare the contribution margin income statement showing the decrease if the industrial systems line is dropped. (Use parentheses or a minus sign for an operating loss.) Deluxe Safety Total Analysis of Dropping a Product Line Totals With Industrial Systems Totals Without Industrial Systems Decrease If Industrial Systems Is Dropped Sales revenue Varahlo ovnencoe Requirement 2. Prepare contribution margin income statements to show Deluxe Safety's total operating income under the two alternatives: (a) with the industrial systems line and (b) without the line. Compare the difference between the Print alternatives' income numbers to your answer to Requirement 1. What have you learned from this comparison? Begin by preparing the statements with and without the industrial systems line, then prepare the contribution margin income statement showing the decrease if the industrial systems line is dropped. (Use parentheses or a minus sign for an operating loss.) Deluxe Safety Total Analysis of Dropping a Product Line Totals With Industrial Systems Totals Without Industrial Systems Decrease of Industrial Systems Is Dropped Sales revenue Variable expenses: Cost of goods sold Marketing and administrative expense Total variable expenses Contribution margin Fixed expenses: Cost of goods sold Marketing and administrative expense Total fixed expenses Operating income (loss) What have you learned from this comparison? The operating income difference calculated on the total analysis of dropping a product (1) the expected decrease in operating income Deluxe Safety drops the industrial systems product line, as shown in Requirement 1. This demonstrates that the incremental analysis approach in Requirement 1 yields (2) results as the longer approach in Requirement 2 that compares total operating income under the two alternatives. 1: More Info Product Line Industrial Household Systems Systems Total 310,000 $ 330,000 $ 640,000 Sales revenue Print Fixed expenses: Cost of goods sold Marketing and administrative expense Total fixed expenses Operating income (loss) What have you learned from this comparison? The operating income difference calculated on the total analysis of dropping a product line (1) the expected decrease in operating income if Deluxe Safety drops the industrial systems product line, as shown in Requirement 1. results as the longer approach in Requirement 2 that compares total operating income under the two alternatives. This demonstrates that the incremental analysis approach in Requirement 1 yields (2) 1: More Info Product Line Industrial Household Systems Systems Total $ 310,000 $ 330,000 $ 640,000 $ Sales revenue Cost of goods sold: Variable 40,000 $ 220,000 45,000 $ 85,000 68,000 288,000 Fixed 260,000 113,000 373,000 50,000 217,000 267,000 Total cost of goods sold Gross profit.... Marketing and administrative expenses: Variable 64.000 73,000 137,000 71,000 Fixed 47,000 24,000 Total marketing and 111,000 administrative expenses 97,000 208,000 S (61,000) $ Operating income (loss) 120,000 $ 59,000