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Members of the board of directors of Security Team have received the following operating income data for the year anded May 31,2018 : (Click the
Members of the board of directors of Security Team have received the following operating income data for the year anded May 31,2018 : (Click the icon to view the operating income data.) Members of the board are surprised that the industrial systems product line is not profitable. They commission a study to desermine whether the company should drop the line. Company accountants estimate that dropping industrial systeens will decrease fixed coot of goods sold by 584,000 and decrease fixed seling and administrative expenses by $11,000. Read the reguitements. Data table Data table Requirements 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Team'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 ? Wariabie Costs: Manufacturing Selling and Administrativo Total Variable Costs \begin{tabular}{ll} & Industrial Systems Industrial Systems Systems Is Dropped \\ \hline Net Sales Revenue & \end{tabular} Variable Costs: Manufacturing Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Fixed Costs Operating Income (Loss)
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