Members of the board of directors of Security Team have received the following operating income data for the year ended 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 determine whether the company should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $83,000 and decrease fixed selling and administrative expenses by $11,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating income Requirement 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. (Use parentheses or a minus sign for an operating loss.) Security Team Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Change if Industrial Industrial Systems Industrial Systems Systems Is Dropped Net Sales Revenue Variable Costs: Manufacturing Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Total Fixed Costs Operating Income (Loss) Requirement 3. What have you learned from the comparison in Requirement 2? The operating income difference calculated on the total analysis of dropping a product line the expected decrease in operating income if Security Team 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. Security Team Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total Net Sales Revenue $ 340,000 $ 390,000 $ 730,000 Cost of Goods Sold: Variable 40,000 250,000 49,000 69,000 89,000 319,000 Fixed Total Cost of Goods Sold 290,000 118,000 408,000 Gross Profit 50,000 272,000 322,000 Selling and Administrative Expenses: Variable 68,000 40,000 74,000 25,000 142,000 65,000 Fixed 108,000 99,000 207,000 Total Selling and Administrative Expenses $ (58,000) $ 173,000 $ 115,000 Operating Income (Loss)