group activity Mailings Review View Aalbcde Albede Abd AaBbCcDc ABCD No Spacing Members of the board of directors of Security Check have received the following operating income data for the year ended May 31, 2018: Heading Heading 2 Heading Total $ 740,000 SECURITY CHECK Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Net Sales Revenue $360,000 $ 380,000 Cost of Goods Sold Variable 37,000 47.000 Fixed 260,000 63,000 Total Cost of Goods Sold 297.000 110,000 Gross Profit 63.000 270,000 Selling and Administrative Expenses Variable 64,000 73,000 Fixed 44,000 26.000 Total Selling and Administrative Expenses 108,000 99.000 Operating Income (Loss) $ 145.000) $ 171,000 1 84,000 323,000 407,000 333,000 137.000 70,000 207,000 5 126.000 Members of the board are surprised that the industrial systems product line is not profitable. They commission a study to determine whether the company should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $80,000 and decrease fixed selling and administrative expenses by $12,000. Requirements 1. Prepare a differential analysis to show whether Security Check should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Check'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. 3. What have you leamed from the comparison in Requirement 2? States) Bool