Members of the board of directors of Security Systems 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 $81,000 and decrease fixed marketing and administrative expenses by $13,000. Requirements 1. Prepare an incremental analysis to show whether Security Systems should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Systems' 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 Systems should drop the industrial systems product line. Security Systems 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 Expected decrease in operating income X al sy 0 More Info Product Line Industrial Household Systems Systems Total $ 370,000 $ 390,000 $ 760,000 Sales revenue. Cost of goods sold: Variable $ 33,000 $ 260,000 49,000 $ 68,000 82,000 328,000 410,000 293,000 117,000 Fixed Total cost of goods sold Gross profit Marketing and administrative expenses: Variable 77,000 273,000 350,000 68,000 46,000 74,000 28,000 142,000 74,000 Fixed Total marketing and administrative expenses 114,000 102,000 216,000 (37,000) $ 171,000 $ 134,000 Operating income (loss). Print Done