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Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $79,000 and decrease fixed marketing and administrative expenses by $13,000. Members of the board of directors of Security First 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. i Data Table Requirement 1. Prepare an incremental analysis to show whether Security First should discontinue the industrial syster A B D 1 Security First 2 Product Line Contribution Margin Income Statement 3 3 For the Year 4 Incremental Analysis for Discontinuation Decision Total Contribution margin lost if Industrial Systems is discontinued Less: Fixed cost savings if Industrial Systems is discontinued Operating income gained if Industrial Systems is discontinued Requirement 2. Prepare contribution margin income statements to show Security First's total operating income under th alternatives' income numbers to your answer to Requirement 1. What have you leamed from this comparison? Begin by preparing the statements with and without the industrial systems line, then prepare the contribution margin in operating loss.) Security First Total Analysis of Discontinuing a Product Line en the two 6 Product lines Industrial Household Company Systems Systems Total $ 340,000 S 380,000 $ 720.000 7 Sales revenue 7 hus sign for an 8 Less cost of goods sold: 9 Variable 46,000 77.000 331,000 10 Fixed 31,000 270,000 39,000 S 61,000 273,000 S 11 Gross profit $ 312.000 Totals With Industrial Systems Totals Without Industrial Systems Difference 12 Less marketing and administrative expenses: 13 Variable Salos revenue 69,000 44,000 14 Fixed 70,000 139.000 27,000 71,000 176,000 S 102,000 Variable expenses: Cost of aoods sold 11 1 15 Operating income (loss) $ (74,000) Choose from any list or enter any number in the input fields and then continue to the next question. ? Print Done Members of the board of directors of Security First have recelved the following operating Income data for the year just Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by ended: $79.000 and decrease fixed marketing and administrative expenses by S13,000. Click the icon to view the operating income data.) Read the requirements 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. Requirement 2. Prepare contribution margin income statements to show Security First'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 First Total Analysis of Discontinuing a Product Line Totals With Totals Without Industrial Systems Industrial Systems Difference Sales revenue Variable expenses: Cost of goods sold Marketing and administrative expense Total variable expenses Contribution margin Fixed expenses: Cost of goods sold Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $79,000 and decrease fixed marketing and administrative expenses by $13,000. Members of the board of directors of Security First have received the following operating income data for the year just ended: 3 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. Industrial Systems Industrial Systems Difference Read the requirements Sales revenue Variable expenses: 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) What have you learned from this comparison? The operating income difference calculated on the total analysis of discontinuing a product line does not equal the expected decrease in operating income if Security First discontinues the industrial systems product line, as shown in Requirement 1 This demonstrates that the incremental analysis approach Requirement 1 yields different results as the longer approach in Requirement 2 that compares total operating income under the two alternatives. Choose from any list or enter any number in the input fields and then continue to the next

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