Company accountants estimate that discontinuing the industrial systems ine w decrease fixed cost of goods sold by $85,000 and decrease fixed marketing and administrative expenses by $16,000 Members of the board of directors of Security Team 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 Read the requirements Requirement 1. Prepare an incremental analysis to show whether Security Team should discontinue the industrial systems product line Incremental Analysis for Discontinuation Decision Contribution margin lost if Industrial Systems is discontinued Less: Fixed cost savings if Industrial Systems is discontinued Operating income if Industrial Systems is discontinued Requirement 2. Prepare contribution margin income statements to show Security Team'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 it the industrial systems line is discontinued. (Use parentheses or a minus sign for an operating loss.) Security Team Total Analysis of Discontinuing a Product Line Security Team Product Line Contribution Margin Income Statement For the Year Product lines Industrial Household Company Systems Systems Total Sales revenue $ 360,000 $ 380,000 $ 740,000 Less cost of goods sold: Variable 35,000 43,000 78,000 250,000 63,000 313,000 Fixed Gross profit 75,000 $ 274,000 $ 349,000 Less marketing and administrative expenses: Variable 63,000 77,000 140,000 43,000 27,000 70,000 Fixed (31,000) $ 170,000 $ 139,000 Operating income (loss) $ Print Done View Requirement 2. Prepare contribution margin income statements to show Security Team'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 leamed 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 it the industrial systems line is discontinued. (Use parentheses or a minus sign for an operating loss.) Totals Without Totals With Industrial Systems Industrial Systems Difference 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) The operating income difference calculated on the total analysis of discontinuing a product line Security Team discontinues the industrial systems product line, as shown in Requirement 1 the expected decrease in operating income if ertad decrease in operating incon results as the longer approach in Requirement that compares total This demonstrates that the incremental analysis approach in Requirement 1 yields operating income under the two alternatives. Choose from any list or enter any number in the input fields and then continue to the next