Members of the board of directors of Security Force 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 drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $82,000 and decrease fixed marketing and administrative expenses by $15,000.
Requirements
1. Prepare an incremental analysis to show whether Security Force should drop the industrial systems product line.
2. Prepare contribution margin income statements to show Security Force€™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?

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Product Line Industrial Household Total Systems $360,000 370,000 $730,000 Systems ales revénue Cost of goods sold: Variable Fixed Total cost of goods sold 35,000 42,000 S 77,000 66,000 52,0 260,000 295,000 65,000 262,000 108,000 403,000 Gross proft Marketing and administrative expenses 327,000 Variable Fixed Total marketing and 66,000 71,000 137,000 42,000,00 64,000 108,000 (43.000) $169.000 93,000 201,000 $126,000 administrative expenses Operating income (loss)