Question

Data / Requirement

Members of the board of directors of Security One 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 $12,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Security One should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating income i Requirements - X 1. Prepare a differential 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. 3. What have you learned from the comparison in Requirement 2? Print Done A Data Table - X Security One Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total 340,000 $ 370,000 $ 710,000 Net Sales Revenue $ Cost of Goods Sold: Variable 40,000 240,000 280,000 43,000 66,000 83,000 306,000 Fixed Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses: 109,000 261,000 389,000 321,000 60,000 Variable 74,000 28,000 135,000 66,000 Fixed 61,000 38,000 99,000 (39,000) $ Total Selling and Administrative Expenses 102,000 201,000 159,000 $ 120,000 $ Operatina Income (Loss) Print Done