Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $86,000 and decrease fixed marketing and administrative expenses by $9,000. 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. Incremental Analysis for Discontinuation Decision Total Contribution margin lost if Industrial Systems is discontinued Less: Fixed cost savings if Industrial Systems is discontinued Operating income if Industrial Systems is discontinued 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 Systems Total Analysis of Discontinuing a Product Line Totals With Totals Without Industrial Systems Industrial Systems 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) Data Table 123 Security Product Line Contribution Margin Income Statement For the Year Product lines Industrial Household Company Systems Systems Total $ 330,000 $ 340,000 $ 670,000 Sales revenue Less cost of goods sold: Variable 37,000 210,000 48,000 67,000 85,000 277,000 Fixed 83,000 $ 225,000 $ 308,000 Gross profit Less marketing and administrative expenses: Variable Fixed 60,000 39,000 (16,000) $ 74,000 28,000 123,000 $ 134,000 67,000 107,000 Operating income (loss) Print Done 0 Requirements 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? Print Done