Members of the board of directors of Security System have received the following operating income data for the year ended May 31, 2024:

Security System
Income Statement
For the Year Ended May 31, 2024
	Product Line
	Industrial Systems	Household Systems	Total
Net Sales Revenue	$300,000	$370,000	$670,000
Cost of Goods Sold:
Variable	39,000	49,000	88,000
Fixed	240,000	69,000	309,000
Total Cost of Goods Sold	279,000	118,000	397,000
Gross Profit	21,000	252,000	273,000
Selling and Administrative Expenses:
Variable	66,000	75,000	141,000
Fixed	40,000	24,000	64,000
Total Selling and Administrative Expenses	106,000	99,000	205,000
Operating Income (Loss)	$(85,000)	$153,000	$68,000

USE THE DATA ABOVE 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 the fixed cost of goods sold by $83,000 and decrease fixed selling and administrative expenses by $11,000.

Read the requirements

Question content area bottom Part 1 Requirement 1. Prepare a differential analysis to show whether Security System should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.)

		in operating income

Requirements:

1.	Prepare a differential analysis to show whether Security System should drop the industrial systems product line.
2.	Prepare contribution margin income statements to show Security System'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?