Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $84,000 and decrease fixed marketing and administrative expenses by $9,000. Members of the board of directors of Security First 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 First should discontinue the industrial systems product line. Total 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 A B 1 Security First 2 Product Line Contribution Margin Income Statement 3 For the Year Product lines Industrial Household Systems Systems Company Total 6 7 Sales revenue $ 300,000 $ 360,000 $ 660,000 8 Less cost of goods sold: 9 Variable 35,000 46,000 81,000 10 Fixed 260,000 62,000 322,000 11 Gross profit $ 5,000 $ 252,000 $ 257,000 12 Less marketing and administrative expenses: 13 Variable 66,000 73,000 139,000 14 Fixed 40,000 26,000 66,000 $ 15 Operating income (loss) (101,000) $ 153,000 $ 52,000