Product Line Industrial SystemsHousehold SystemsTotal Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . .$340,000$360,000$700,000 Cost of goods sold: Variable. . . . . . . . . . . . . . . . . . . . . . . . .$37,000$42,000$79,000 Fixed. . . . . . . . . . . . . . . . . . . . . . . . . . .220,00070,000290,000 Total cost of goods sold. . . . . . . . . . .257,000112,000369,000 Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . .83,000248,000331,000 Marketing and administrative expenses: Variable. . . . . . . . . . . . . . . . . . . . . . . . .60,00077,000137,000 Fixed. . . . . . . . . . . . . . . . . . . . . . . . . . .39,00030,00069,000 Total marketing and administrative expenses. . . . . . . . . . . . . . . . . . . . . . . .99,000107,000206,000 Operating income (loss). . . . . . . . . . . . . . . . .$(16,000)$141,000$125,000

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Members of the board of directors of Security Systems have received the following operating income data for the year just ended: i) (Click the icon to view the operating income data.) 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 drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $82,000 and decrease fixed marketing and administrative expenses by $15,000. Requirements 1. Prepare an incremental analysis to show whether Security Systems should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Systems' 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? 1 Members of the board of erections of Securhy Syatems have recelved the following operating incorne data for the year just ended. (3) (Click the icon to view the operating income data.) Members of the boars are surprised that the industrial systems product line a losing money. They commistion a study to determine whether the company should drop the line. Company accourtants esfimate that dropping industrial sysiers will docrease fued cost of goods sold by $82,000 and decrease foed maketing and administrative expenses by $15,000. Requirements 1. Prepare an incremental analysis to show whether Secuncy Systems shoult industrial systems product ine. 2. Prepare contribution margin income statements to show Securty Systems' operating income under the two alternatives: (a) with the industrial systems and (b) withous the line. Compare the difference between the two atternativ. numbers to your answer to Requirement 1. What have you leamed from Bis comparison? More info Total Analysis of Drepping a Product this Video Get more help