Members of the board of directors of Security Force 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 drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $78,000 and decrease fixed marketing and administrative expenses by $8,000. Requirements 1. Prepare an incremental analysis to show whether Security Force should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Force'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. What have you learned from this comparison? Requirement 1. Prepare an incremental analysis to show whether Security Force should drop the industrial systems product line. Security Force Incremental Analysis of Dropping a Product Line Expected decrease in revenues: Dropping industrial systems sales Expected decrease in expenses Variable expenses Cost of goods sold Marketing and administrative expenses Fixed expenses Cost of goods sold Marketing and administrative expenses Expected decrease in total expenses More info Product Line Industrial Household Systems Systems Total $ 300,000 $ 330,000 $ 630,000 Sales revenue Cost of goods sold: Variable $ 39,000 $ 250,000 43,000 $ 72,000 82,000 322,000 289,000 115,000 404,000 Fixed Total cost of goods sold Gross profit..... Marketing and administrative expenses: Variable 11,000 215,000 226,000 66,000 43,000 75,000 30,000 141,000 73,000 Fixed Total marketing and administrative expenses Operating income (loss).. 109,000 105,000 214,000 (98,000) $ 110,000 $ 12,000 Print Done