Members of the board of directors of Security First have received the following operating income data for the year ended May 31, 2018:

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 $82,000 and decrease fixed selling and administrative expenses by $12,000.

Requirement 1. Prepare a differential analysis to show whether Security First should drop the industrial systems product line. (I already did this requirement)

Requirement 2. Prepare contribution margin income statements to show Security First'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.

Security First Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total Net Sales Revenue $ 300,000 $ 310,000 $ 610,000 Cost of Goods Sold 35,000 250,000 285,000 15,000 43,00078,000 69,000 319,000 112,000 397,000 198,000 213,000 Variable Fixed Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses 72,000 134,000 22,000 61,000 94,000 195,000 $ (86,000) $104,000 $ 18,000 62,000 39,000 101,000 Variable Fixed Total Selling and Administrative Expenses Operating Income (Loss) $ (300,000) Expected decrease in revenues Expected decrease in total variable costs Expected decrease in fixed costs Expected decrease in total costs Expected decrease in operating income $ 97,000 94,000 191,000 Security First 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)