Relevant Costs for Short- 5OA Prepars and use contribution marain statements for discontinuing a line decisior Learning Objective 4) Members of the board of directors of Security Alliance have received the following oper- ating income data ior the year just ended: SecurityIncome5 Security Alliance Product Line Contribution Margin Income Statement For the Year Industrial Systems Household Systems [5 Company Total 380,000 E 690,000 310,000 i s 8 Varia 32,000 78,000 346,000 0 Gross profit 11 Less marketing and administrative expenses 12 Variable 3 Fixed 4 Operating income (loss) 5 (2,000)5 268,0005 266,000 63,000 37,000 132,000 60,000 000) S 176,000S 74,000 69,000 23,000 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 $80,000 and decrease fixed marketing and adminis- trative expenses by $11,000. Requirements 1. Prepare an incremental analysis to show whether Security Alliance should discontinue the industrial systems product line. Prepare contribution margin income statements to show Security Alliance'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' in- come numbers to your answer to Requirement 1. What have you learned from this 2. comparison