Members of the board of directors of Adobe Security One have received the following operating income data for the year just ended:

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 $ 84,000 and decrease fixed marketing and administrative expenses by $ 12,000.

1. Prepare an incremental analysis to show whether Adobe Security One should discontinue the industrial systems product line.
2. Prepare contribution margin income statements to show Adobe Security’s total oper-ating 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 thiscomparison?

  • CreatedAugust 27, 2014
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