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Members of the board of directors of Safety Systems have received the following operating income data for the year just ended:

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 discontinuing the industrial systems line will decrease fixed cost of goods sold by $\backslash (\backslash$$ $79,000\backslash )$ and decrease fixed marketing and administrative expenses by $\backslash (\backslash$$ $12,000\backslash ).$

Read the requirements.

Requirement $1.$ Prepare an incremental analysis to show whether Safety Systems should discontinue the industrial systems product line.

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

if Industrial Systems is discontinued

Requirements

$1.$ Prepare an incremental analysis to show whether Safety Systems should discontinue the industrial systems product line.

$2.$ Prepare contribution margin income statements to show Safety Systems' 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?

Product Line Contribution Margin Income Statement

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