. X - Data Table Security One Income Statement For the Year Ended May 31, 2018 Product Line Industrial Household Systems Systems Total Net Sales Revenue $ 300,000 $ 320,000 $ 620,000 Cost of Goods Sold: Variable 35,000 46,000 81,000 Fixed 240,000 66,000 306,000 275,000 Total Cost of Goods Sold 112,000 387,000 Gross Profit 25,000 208,000 233,000 Selling and Administrative Expenses: Variable 69,000 74,000 143,000 43,000 24,000 Fixed 67,000 112,000 98,000 Total Selling and Administrative Expenses 210,000 $ (87,000) $ 110,000 $ 23,000 Operating Income (Loss) Print Done A - X Requirements 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 This Question: 13 pts 20 of 20 (0 complete) This Test: 75 pts possib Members of the board of directors of Security One have received the following operating income data for the year ended May 31, 2018: E: (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 $15,000. 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 Requirement 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. (Use parentheses or a minus for an operating loss.) Security One Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals With Totals Without Change if Industrial Industrial Systems Industrial Systems Systems Is Dropped 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 expected decrease in operating income if The operating income difference calculated on the total analysis of dropping a product line Security One drops the industrial systems product line, as shown in Requirement 1. V result as the longer approach in Requirement 2 that compares total This demonstrates that the differential analysis approach in Requirement 1 yields operating income under the two alternatives Requirement 1. Prepare a differential analysis to show whether Security enter decreases to profits.) Expected decrease in revenues Expected increase in revenues in operating income Expected decrease in fixed costs Expected decrease in total variable costs Expected increase in fixed costs Expected increase in total variable costs RI ients to show systems line and (b) without the line. Compare the difference between th RO Expected decrease in total costs Expected increase in total costs ients to show Sec e between the two sy in operating income R sy Expected decrease mi Expected increase nents e betv Security One
