Question
Members of the board of directors of Control One have received the following operating income data for the year ended May 31, 2024: (Click
Members of the board of directors of Control One have received the following operating income data for the year ended May 31, 2024: (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 $84,000 and decrease fixed selling and administrative expenses by $14,000. Data table Net Sales Revenue Cost of Goods Sold: Variable Control One Income Statement For the Year Ended May 31, 2024 Product Line Industrial Systems Household Systems Total $ 330,000 $ 360,000 $690,000 33,000 43,000 76,000 Fixed 230,000 66,000 296,000 Total Cost of Goods Sold 263,000 109,000 372,000 Gross Profit 67,000 251,000 318,000 Requirements 1. Prepare a differential analysis to show whether Control One should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Control One'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 learned from the comparison in Requirement 2? Print Done
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