Members of the board of directors of Security First have received the following operating income data for the year just ended:

$($Click the icon to view the operating income data.$)$

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

discontinue the line.

Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $$82,000$ and decrease fixed marketing and

administrative expenses by $$10,000.$

Read the requirements.

Requirement $1.$ Prepare an incremental analysis to show whether Security First should discontinue the industrial systems product line.

Incremental Analysis for Discontinuation Decision

Total

Contribution margin lost if Industrial Systems is discontinued

Less: Fixed cost savings if Industrial Systems is discontinued

Operating income

f Industrial Systems is discontinued

this comparison?

Security First

Total Analysis of Discontinuing a Product Line

What have you learned from this comparison?

The operating income difference calculated on the total analysis of discontinuing a product line

the expected decrease in operating income if Security First discontinues the industrial systems product line, as shown in Requirement $1.$

Data table