Safety Step Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total $ 300,000 $ 330,000 $ 630,000 Net Sales Revenue Cost of Goods Sold: Variable Foced 34.000 250,000 284.000 43,000 68,000 109,000 221,000 77,000 310,000 393,000 237,000 Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses: 16,000 Variable 68,000 39,000 77,000 25,000 145,000 64,000 Fixed Total Selling and Administrative Expenses Operating Income (Loss) 107.000 (91,000) $ 102.000 119,000 $ 200.000 28,000 Print | Done] Requirements 1. Prepare a differential analysis to show whether Safety Step should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Safety Step'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 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 $82.000 and decrease fixed selling and administrative expenses by $11,000. 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.) Expected decrease in revenues $ (300,000) Expected decrease in total variable costs $ 102,000 93,000 Expected decrease in fixed costs Expected decrease in total costs 195.000 $ (105,000) Expected decrease in operating income Requirement 2. Prepare contribution margin income statements to show Safety Step'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 minus sign for an operating loss.) Safety Step Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Industrial Systems Industrial Systems 630000 330000 Change if Industrial Systems Is Dropped 300000 Net Sales Revenue Variable Costs: MI-- -- - 77 Anno n al Safety Step Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Industrial Systems Industrial Systems 630000 330000 Change if Industrial Systems Is Dropped 300000 Net Sales Revenue Variable Costs: Manufacturing 77000|| 34000 68000 145000 Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Total Fooed Costs Operating Income (Loss) Enter any number in the edit fields and then click Check
