Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Members of the board of directors of Security Check have received the following operating income data for the year ended May 31, 2018: the ls
Members of the board of directors of Security Check have received the following operating income data for the year ended May 31, 2018: the ls to wdow the operating incon atrial svetems product line yto determine whether the company should drop the line. Company accountants estimate that dropping industrial of the tprofitable. They commission systems will decrease fixed cost of goods sold by $80.000 and decrease fixed selling and administrative expenses by $12.000. Read the requirements Requirement 1. Prepare a differential analysis to show whether Security Check should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) S (360,000) Expected decrease in revenues Expected decrease in total variable costs 101,000 92,000 Expected decrease in fixed costs 193.000 total costs Expected decrease $ (167.000) Expected decrease in operating income Net Sales Revenue 360,000 $ 380,000 $ 740,000 Cost of Goods Sold: Variable 37,000 47,000 84,000 260,000 63,000 323,000 Fixed 297,000 110,000 407,000 Total Cost of Goods Sold Gross Profit 63,000 270,000 333,000 Selling and Administrative Expenses: Variable 64,000 73,000 137,000 44,000 26,000 70,000 Fixed 207,000 99,000 108,000 Total Selling and Administrative Expenses (45,000) $ 171,000 $ 126,000 Operating Income (Loss) Requirement 2. Prepare contribution margin income statements to show Security Check'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 altenatives' income numbers to your answer to Requirement 1. (Use parentheses or a minus sign for an operating loss.) Security Check Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Change if Industrial Industrial Systems Industrial Systems Systems Is Dropped Net Sales Revenue Variable Costs Manufacturing Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs Manufacturing Selling and Administrative Total Fixe Costs Operating Income (Loss)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started