Members of the board of directors of

Security AlarmsSecurity Alarms

have received the following operating income data for the year ended May 31 comma 2018 :May 31, 2018:

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(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

$ 82 comma 000$82,000

and decrease fixed selling and administrative expenses by

$ 12 comma 000$12,000.

Requirement 2. Prepare contribution margin income statements to show

Security Alarm'sSecurity Alarm'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.)

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

does not equal

equals

the expected decrease in operating income if

Security AlarmsSecurity Alarms

drops the industrial systems product line, as shown in Requirement

1.

This demonstrates that the differential analysis approach in Requirement 1 yields

different

the same

result as the longer approach in Requirement 2 that compares total operating income under the two alternatives.

Menters of the board of director of Security Alarms have received the win t ing income det for the yow ended My 31, 2018 Ciothekoon view the pating income ) Members of the board are surprised that the industrial systems product i s not profitable. They commission study to determine whether the company should drop the the Company sold by $12.000 and decreased seling and di v erses by 512.000 Read the countants estimate that dropping industrial systems will decreased cost of goods Requirement 1. Prepare a diferential analysis to show whether Security Alumns should do the industrial system product linee perhess oraussette decreases to prots Excedersen Dec decrease in our Exp ressen bed t reening erratives with the industrial system Ine and without the line. Compare the rece between the two artis income Requirement 2. Prepare contribution margin income statements to show Security Alarms totalring come under the t numbers to your inte r e s a m ig for an operating ) Security Alarms Contribution Margie Income Statement For the Year Ended May 31, 2018 ledes usar Na Slover Mandi Sangande Total Costs Contribution Margin Fived Costs Manufacturing Selling and Administrative 1. Prepare a differential analysis to show whether Security Alarms should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Alarm'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 Nel Sales Revenue Variable Costs Manufacturing Seling and Administrative Total Variable costs Contribution Margin Feed Costs Manufacturing Seling and Administrative Total Fixed Coats Operating Income (Loss) Requirement 3. What have you learned from the comparison in Requirement 2 The operating income G rence calculated on the total analysis of dropping a product line This demonstrates that the differential analysis approach in Requirement de the expected decrease in operating income Security Alarms drops the industrial systems product line, as shown in Requirement result is the longer approach in Requirement that compares sotal operating income under the alternatives Choose from any list or enter any number in the input fields and then continue to the next question Data Table Security Alarms Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total $ 340,000 $ 370,000 $ 710,000 Net Sales Revenue Cost of Goods Sold. Variable Fixed 39.000 250.000 289,000 49.000 68,000 117,000 88.000 318,000 406,000 51,000 253,000 304,000 Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses Variable 63,000 45 000 Fixed Total Selling and Administrative Expenses 75,000 138,000 21.000 66.000 96,000 204.000 157,000 $ 100,000 108,000 (57,000) $ Operating Income (Loss) Print Done