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Please answer this question Members of the board of directors of security have received the following operating income data for the year just ended: Members
Please answer this question
Members of the board of directors of security have received the following operating income data for the year just ended:
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 discontinue the line.
Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $ 81000 and decrease fixed marketing and administrative expenses by $ 14,000.
1. | Prepare an incremental analysis to show whether Security first should discontinue the industrial systems product line. |
2. | Prepare contribution margin income statements to show Security First'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? |
Data table Requirement 2. Prepare contribution margin income statements to show Security First'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? 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 discontinued. (Use parentheses or a minus sign for an operating loss.) The operating income difference calculated on the total analysis of discontinuing a product line ndustrial systems product line, as shown in Requirement 1. This demonstrates that the incremental analysis approach in Requirement 1 yields alternatives. the expected decrease in operating income if Security First discontinues the results as the longer approach in Requirement 2 that compares total operating income under the two
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