P25-23A (similar to) Question Help Members of the board of directors of Safety Step 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 $81,000 and decrease fixed selling and administrative expenses by $14,000. Read the requirements Requirement 1. Prepare a differential analysis to show whether Safety Step should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) Data Table in operating income Safety Step Income statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systeme Total $ 300,000 $ 370,000 $ 670,000 Net Sales Revenge Cost of Goods Sold: Variable 33.000 230,000 263,000 48.000 68.000 116.000 81,000 298,000 379,000 Fixed Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses Variable 37,000 254,000 291,000 62.000 43,000 77.000 28.000 139,000 71,000 105,000 105,000 210,000 Fored Total Selling and Administrative Expenses Operating Income (Loss) S (68.000) S 149,000 $ 81,000 Print Done Requirement 2. Prepare contribution margin income statements to show Safety Place'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 mintus sign for an operating loss.) Safety Place Contribution Margin Income Statement For the Year Ended May 31, 2018 Totala with Totals Without Change if Industrial Industrial Systeme 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 Fored Costs Operating Income (Loss) Requirement 3. What have you learned from the comparison in Requirement 2? the expected decrease in operating income if Safety Place drops the industrial The operating income difference calculated on the total analysis of dropping a product line systems product line, as shown in Requirement 1. This demonstrates that the differential analysis approach in Requirement 1 yields the two alternatives V result as the longer approach in Requirement 2 that compares total operating income under