B C D Security Systems Product Line Contribution Margin Income Statement A 1 2 3 4 6 7 Sales revenue 8 Less cost of goods sold: 9 Variable 10 Fixed 11 Gross profit For the Year Product lines Industrial Household Company Systems Systems Total $ 300,000 $ 310,000 $ 610,000 12 Less marketing and administrative expenses: 33,000 42,000 75,000 190,000 62,000 252,000 $ 77,000 $ 206,000 $283,000 13 Variable 60,000 75,000 135,000 14 Fixed 42,000 24,000 66,000 15 Operating income (loss) $ (25,000) $ 107,000 $ 82,000 Requirements 1. Prepare an incremental analysis to show whether Security Systems should discontinue the industrial systems product line. 2. Prepare contribution margin income statements to show Security Systems' total operating income under the two alteratives: (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? Members of the board of directors of Security Systems 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. Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by $85,000 and decrease fixed marketing and administrative expenses by $15,000. Read the requirements. Requirement 1. Prepare an incremental analysis to show whether Security Systems should discontinue the industrial systems product line. Incremental Analysis for Discontinuation Decision Contribution margin lost if Industrial Systems is discontinued Less: Fixed cost savings if Industrial Systems is discontinued Operating income if Industrial Systems is discontinued Total