Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $81,000 and decrease fixed marketing and administrative expenses by $15,000. Members of the board of directors of 123 Security 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 123 Security 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 123 Security Product Line Contribution Margin Income Statement For the Year Product lines Industrial Household Company Systems Systems Total Sales revenue $ 280,000 $ 360,000 $ 640,000 Less cost of goods sold: Variable 37,000 47,000 84,000 Fixed 270,000 63,000 333,000 Gross profit $ (27,000) $ 250,000 $ 223,000 Less marketing and administrative expenses: Variable 66,000 73,000 139,000 Fixed 41,000 21,000 62,000 $ (134,000) $ 156,000 $ Operating income (loss) 22,000 1. Prepare an incremental analysis to show whether 123 Security should discontinue the industrial systems product line. 2. Prepare contribution margin income statements to show 123 Security'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? Totals With Totals Without 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 Operatina income (loss)