Members of the board of directors of Safety Point 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 wil decrease fixed cost of goods sold by $81,000 and decrease fixed selling and administrative expenses by $10,000. Read the requirements. * Data Table Requirement 1. Prepare a differential analysis to show whether Safety Point should drop the industrial systems produd Safety Point Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household in operating income Systems Total Systems 300,000 $ Requirement 2. Prepare contribution margin income statements to show Safety Point's total operating income under the alteratives' income numbers to your answer to Requirement 1. (Use parentheses or a minus sign for an operating loss Net Sales Revenue S 320,000 $ 620,000 en the two Cost of Goods Sold: Variable 36,000 46,000 69,000 82,000 299,000 Safety Point Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Fixed 230,000 266,000 115,000 381,000 Change if Industrial Systems Is Dropped 34,000 205,000 239,000 Industrial Systems Industrial Systems Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses Variable Net Sales Revenue 71,000 Variable Costs: 63,000 45,000 134,000 72,000 Fixed 27,000 Choose from any list or enter any number in the input fields and then continue to the next question. 108,000 98,000 Total Selling and Administrative Expenses 206,000 S Operating Income (Loss) (74,000) $ 107,000 $ 33,000 Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Change if Industrial Systems Is Dropped Industrial Systems Industrial Systems 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 Safety Point drops the industrial systems product line, as shown in Requirement 1. This demonstrates that the differential analysis approach in Requirement 1 yields sproach in Requirement 2 that compares total operating income under the two alternatives. does not equal equals Choose from any list or enter any number in the input fields and then continue to the 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 Safety Point 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. Choose from any list or enter any number in the input fields and then continu different stion. the same
