Members of the board of directors of Safe Zone has received the following operating income data for the year ended May 31, 2012:
SAFE ZONE Income Statement For the Year Ended May 31, 2012
	Product Line		Total
	Industrial Systems	Household Systems
Sales revenue	$370,000	$390,000	$760,000
Cost of goods sold:
Variable	36,000	42,000	78,000
Fixed	260,000	65,000	325,000
Total cost of goods sold	$296,000	$107,000	$403,000
Gross profit	$74,000	$283,000	$357,000
Marketing and administrative expenses:
Variable	66,000	75,000	141,000
Fixed	44,000	24,000	68,000
Total marketing and administrative exp.	$110,000	$99,000	$209,000
Operating income (loss)	$(36,000)	$184,000	$148,000
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 drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $84,000 and decrease fixed marketing and administrative expenses by $14,000.
Requirements:
1. Prepare an incremental analysis to show whether Safe Zone should drop the industrial systems product line.
2. Prepare contribution margin income statements to show Safe Zone'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?