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 will decrease fixed cost of goods sold by $84,000 and decrease fixed selling and administrative expenses by $10,000. Read the requirements Requirement 1. Prepare a differential analysis to show whether Safety Point should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) Expected decrease in revenues -330000 Expected decrease in total variable costs 102000 Expected increase in fixed costs 94000 Expected decrease in total costs 196000 Expected decrease in operating income Requirement 2. Prepare contribution margin income statements to show Safety Point'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.) Safety Point Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Industrial Systems Industrial Systems 710000 Change if Industrial Systems Is Dropped Net Sales Revenue Variable Costs: Manufacturing 77000 143000 Selling and Administrative Total Variable Costs 220000 Contribution Margin 490000 Fixed Costs: Manufacturing 295000 65000 Selling and Administrative Total Fixed Costs 360000 130000 Operating Income (Loss) -23000 Requirement 3. What have you learned from the comparison in Requirement 2? Data table Safety Point Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total Net Sales Revenue $ 330,000 $ 370,000 $ 700,000 Cost of Goods Sold: Variable 36,000 250,000 44,000 66,000 80,000 316,000 Fixed 286,000 110,000 396,000 Total Cost of Goods Sold Gross Profit 44,000 260,000 304,000 Selling and Administrative Expenses: Variable 70,000 66,000 43,000 136,000 71,000 28,000 Fixed Total Selling and Administrative Expenses 109,000 98,000 207,000 $ 165 000 $ 162 000 $ 97 000 Print Done