D 1 Security Team Product Line Contribution Margin Income Statement For the Year 3 4 6 Product lines Industrial Household Company Systems Systems Total $ 300,000 $ 310,000 S 610,000 7 Sales revenue 8 Less cost of goods sold: 9 Variable 49.000 88,000 40.000 220,000 10 Fixed 62.000 282,000 11 Gross profit S 40,000 $ 200 000 $ 240.000 12 Less marketing and administrative expenses: 13 Variable 61,000 75,000 136.000 45,000 20.000 Fixed 65,000 (66.000) $ 105 000 $ 39 000 15 Operating income (loss) Print Done ease in operating income if Security Team discontinues the industrial systems product line, as shown in Rec ? that comnares total operating income under the two alternatives. Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $83,000 and decrease fixed marketing and administrative expenses by $12,000. Members of the board of directors of Security Team have received the following operating income data for the year just ended: 3 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. 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 Team's total operating income under the two alternatives: (a) with the industrial systems line and (b) without the line. Compare the Members of the board of directors of Security Team have received the following operating income data for the year just ended Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $83.000 a Click the icon to view the operating income data.) marketing and administrative expenses by $12,000. Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the Read the requirements compare should discontinue the line 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 a Requirement 1 What have you learned from this comparison? Begin by prepanng 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 Team Total Analysis of Discontinuing a Product Line Totals With Totals Without Industrial Systems Industrial Systems Difference Sales revenue Vanable expenses Cost of goods sold Marketing and administrative expense Toral variable expenses Comincunan margin Fred expenses Cost of goods sold Marketing and administrative expense Total ved expenses Operating income (loss) What have you learned from this comparison