members of the board of secruity one directors of have received the following operating income data for the year just ended:

Industrial Systems

Household Systems

Total

Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . .

$380,000

$390,000

$770,000

Cost of goods sold:

Variable. . . . . . . . . . . . . . . . . . . . . . . . .

$38,000

$47,000

$85,000

Fixed. . . . . . . . . . . . . . . . . . . . . . . . . . . .

280,000

64,000

344,000

Total cost of goods sold. . . . . . . . . . .

318,000

111,000

429,000

Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,000

279,000

341,000

Marketing and administrative expenses:

Variable. . . . . . . . . . . . . . . . . . . . . . . . .

60,000

73,000

133,000

Fixed. . . . . . . . . . . . . . . . . . . . . . . . . . . .

41,000

24,000

65,000

Total marketing and administrative expenses. . . . . . . . . . . . . . . . . . . . . . . .

101,000

97,000

198,000

Operating income (loss). . . . . . . . . . . . . . . . .

$(39,000)

$182,000

$143,000View the operating income data. LOADING... Board members 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 the fixed cost of goods sold by 79000 and decrease fixed marketing and administrative expenses by 13000 . Read the requirements.LOADING...

1.	Prepare an incremental analysis to show whether Security One should drop the industrial systems product line.
2.	Prepare contribution margin income statements to show Security One'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?

Question content area bottom Part 1 Requirement 1. Prepare an incremental analysis to show whether should drop the industrial systems product line. Security One 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 Part 2 Requirement 2. Prepare contribution margin income statements to show 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? Begin by preparing the statements with and without the industrial systems line, then prepare the contribution margin income statement showing the decrease if the industrial systems line is dropped. (Use parentheses or a minus sign for an operating loss.) Security One Total Analysis of Dropping a Product Line Totals With Industrial Systems Totals Without Industrial Systems Decrease If Industrial Systems Is Dropped Sales revenue Variable expenses: Cost of goods sold Marketing and administrative expense Total variable expenses Contribution margin Fixed expenses: Cost of goods sold Marketing and administrative expense Total fixed expenses Operating income (loss) Part 3 Answer the following questions. How does the operating income difference calculated on the total analysis of dropping a product line compare to the expected decrease in operating income if Security One drops the industrial systems product line? Are the results from the incremental analysis approach the same as the approach that compares total operating income?