Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Members of the board of directors of Security First have received the following operating income data for the year ended May 31,2018 : (Click the
Members of the board of directors of Security First have received the following operating income data for the year ended May 31,2018 : (Click the icon to view the operating income data.) dropping industrial systems will decrease fixed cost of goods sold by $81,000 and decrease fixed selling and administrative expenses by $12,000. Read the Requirements 1. Prepare a differential analysis to show whether Security First should drop the industrial systems product line. 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. 3. What have you learned from the comparison in Requirement 2? 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 Safety Place Contribution Margin Income Statement For the Year Ended May 31, 2018 \begin{tabular}{lccc} \multicolumn{1}{c}{ Totals With } & Totals Without & Change if Industrial \\ & Industrial Systems Industrial Systems Systems Is Dropped \\ \hline \end{tabular} Variable Costs: Manufacturing Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs: The operating income difference calculated on the total analysis of dropping a product line the expected decrease in operating income if Safety Place drops the industrial systems product line, as shown in Requirement 1. This demonstrates that the differential analysis approach in Requirement 1 yields result as the longer approach in Requirement 2 that compares total operating income under the two alternatives
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