6. Members of the board of directors of Safety Place have received the following operating income data for the year ended May 31, 2018: Print 11(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 $12,000. Read the requirements 12 Requirement 1. Prepare a differential analysis to show whether Safety Place should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) (1) Expected decrease in revenues 310000 (2) Expected decrease in total variable costs $ 99,000 (3) Expected decrease in fixed costs 279000 (4) Expected decrease in total costs (5) Expected decrease in operating income Requirement 2. Prepare contribution margin income statements to show Safety Place'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.) Change if Industrial Systems Is Dropped Safety Place Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Industrial Systems Industrial Systems Net Sales Revenue Variable Costs: Manufacturing Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Total Fixed Costs Operating Income (Loss) Requirement 3. What have you learned from the comparison in Requirement 2? The operating income difference calculated on the total analysis of dropping a product line (6). operating income if Safety Place drops the industrial systems product line, as shown in Requirement 1. the expected decrease in result as the longer approach in This demonstrates that the differential analysis approach in Requirement 1 yields (7) Requirement 2 that compares total operating income under the two alternatives. 11: Data Table Safety Place Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total $ 310,000 $ 320,000 $ 630,000 Net Sales Revenue Cost of Goods Sold: Variable 33,000 79,000 46,000 64,000 Fixed 240,000 304,000 273,000 110,000 383,000 37,000 210,000 247,000 Total Cost of Goods Sold Gross Profit Selling and Administrative Expenses: Variable 66,000 39,000 72,000 21,000 138,000 60,000 Fixed Total Selling and Administrative Expenses 105,000 93,000 198,000 $ Operating Income (Loss) (68,000) $ 117,000 $ 49,000