i Data Table Security Team Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total $ 310,000 $ 320,000 $ 630,000 Net Sales Revenue Cost of Goods Sold: Variable 36,000 230,000 Fixed 49,000 68,000 117,000 85,000 298,000 383,000 Total Cost of Goods Sold 266,000 44,000 203,000 247,000 Gross Profit Selling and Administrative Expenses Variable 61,000 41.000 Fixed Total Selling and Administrative Expenses Operating Income (Loss) 74,000 27,000 101,000 102,000 $ 135,000 68,000 203,000 44,000 102,000 (58,000) $ $ Print Done Members of the board of directors of Security Team have received the following operating income data for the year ended May 31, 2018: (Click the icon to view the operating income data.) 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 $83,000 and decrease fixed selling and administrative expenses by $12,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating income 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 answer to Requirement 1. (Use parentheses or a minus sign for an operating loss.) Security Team Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Industrial Systems Industrial Systems Change if Industrial Systems Is Dropped Net Sales Revenue Variable Costs: Manufacturing Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Total Fixed Costs Operating Income (Loss) Requirement 3. What have you learned from the comparison in Requirement 2? The operating income difference calculated on the total analysis of dropping a product line the expected decrease in operating income if Security Team drops the industrial systems product line, as shown in Requirement 1. This demonstrates that the differential analysis approach in Requirement 1 yields result as the longer approach in Requirement 2 that compares total operating income under the two alternatives