Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $85,000 and decrease fixed marketing and administrative expenses by $15,000. 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 Requirement 2. Prepare contribution margin income statements to show Security First'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 discontinued. (Use parentheses or a minus sign for an operating loss.) Security First Total Analysis of Discontinuing a Product Line Totals With Totals Without Industrial Systems Industrial Systems Difference Sales revenue Variable expenses: Cost of goods sold Marketing and administrative expense Tatalable RRRRRRR Choose from any list or enter any number in the input fields and then continue to the next question. ? Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $85,000 and decrease fixed marketing and administrative expenses by $15,000. 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 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 Operating income (loss) What have you learned from this comparison? the expected decrease in operating income if Security First discontinues the industrial systems product line, as shown in The operating income difference calculated on the total analysis of discontinuing a product line Requirement 1. This demonstrates that the incremental analysis approach in Requirement 1 yields V results as the longer approach in Requirement 2 that compares total operating income under the two alternatives. Choose from any list or enter any number in the input fields and then continue to the next question. ? i X Data Table N 4 A B 1 Security First Product Line Contribution Margin Income Statement 3 For the Year Product lines Industrial Household Company 6 Systems Systems Total 7 Sales revenue $ 370,000 $ 390,000 $760,000 8 Less cost of goods sold: 9 Variable 38,000 48,000 86,000 10 Fixed 260,000 68,000 328,000 11 Gross profit $ 72,000 $ 274,000$ 346,000 12 Less marketing and administrative expenses: 13 Variable 69,000 76,000 145,000 14 Fixed 39,000 21,000 60,000 15 Operating income (loss) $ (36,000) $ 177,000 $ 141,000 Print Done