requirement 2
Members of the board of directors of Security Team have received the following operating income data for the year just ended: 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 discontinue the line Company accountants estimate that disconting the industrial systems line will decrease fixed cost of goods sold by $85,000 and decrease fixed marketing and administrative expenses by $16,000. Read the requirements Requirement 1. Prepare an incremental analysis to show whether Security Team should discontinue the indus Incremental Analysis for Discontinuation Decision Contribution margin lost if Industrial Systems is discontinued Total Less: Fixed cost savings if Industrial Systems is discontinued Operating income if Industrial Systems is discontinued Requirement 2. Prepare contribution margin income statements to show Security Team'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.) Security Team Total Analysis of Discontinuing a Product Line TA Choose from any list or enter any number in the input fields and then continue to the next question Security Team Product Line Contribution Margin Income Statement For the Year Product lines Industrial Household Company Systems u Systems Total 360,000 $ 380,000 $ 740,000 $ Sales revenue Less cost of goods sold: Variable 35,000 250,000 43,000 63,000 78,000 313,000 Fixed Gross profit Less marketing and administrative expenses: Variable $ 75,000 $ 274,000 $ 349,000 63,000 43,000 77,000 27,000 Fixed 140,000 70,000 Operating income (loss) (31,000) $ 170,000 $ 139,000 Print Done Requirement 2. Prepare contribution margin income statements to show Security Team'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.) Totals With Totals Without Industrial Systems Industrial Systems Difference Sales revenue 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) Wilal dve you learned from this comparison? The operating income difference calculated on the total analysis of discontinuing a product line equals Security Team discontinues the industrial systems product line, as shown in Requirement 1. the expected decrease in operating income if This demonstrates that the incremental analysis approach in Requirement 1 yields different operating income under the two alternatives results as the longer approach in Requirement 2 that compares total Choose from any list or enter any number in the input fields and then continue to the next
