Making dropping a product decisionsMembers of the board of directors of Control One have received the following operating income data for the year ended March 31, 2021:CONTROL ONEIncome StatementFor the Month Ended March 31, 2021Product LineIndustrialHouseholdSystemsSystemsTotalSales Revenue$ 330,000$ 370,000$ 700,000Cost of Goods Sold:Variable33,00047,00080,000Fixed240,00069,000309,000Total Cost of Goods Sold273,000116,000389,000Gross Proft57,000254,000311,000Selling and Administrative Expenses:Variable64,00073,000137,000Fixed39,00027,00066,000Total Selling and Administrative E103,000100,000203,000Operating Income (Loss)$ (46,000)$ 154,000$ 108,000 Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the companyshould drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $82,000 and decrease fixedselling and administrative expenses by $15,000.Requirements1. Prepare a differential analysis to show whether Control One should drop the industrial systems product line.2. Prepare contribution margin income statements to show Control One's total operating income under the two alternatives: (a) with the industrial systemsline and (b) without the line. Compare the difference between the two alternatives' income numbers to your answer to Requirement 1.3. What have you learned from this comparison in Requirement 2?

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Description: Making dropping a product decisionsMembers of the board of directors of Control One have received the following operating income data for the year ended March 31, 2021:CONTROL ONEIncome StatementFor the Month Ended March 31, 2021Product LineIndustri

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Making dropping a product decisions Members of the board of directors of Control One have received the following operating income data for the year ended March 31, 2021: CONTROL ONE Income Statement For the Month Ended March 31, 2021 Product Line Industrial Household Systems Systems Total Sales Revenue $ 330,000 $ 370,000 $ 700,000 Cost of Goods Sold: Variable 33,000 47,000 80,000 Fixed 240,000 69,000 309,000 Total Cost of Goods Sold 273,000 116,000 389,000 Gross Proft 57,000 254,000 311,000 Selling and Administrative Expenses: Variable 64,000 73,000 137,000 Fixed 39,000 27,000 66,000 Total Selling and Administrative E 103,000 100,000 203,000 Operating Income (Loss) $ (46,000) $ 154,000 $ 108,000

Making dropping a product decisions Members of the board of directors of Control One have received the following operating income data for the year ended March 31, 2021: CONTROL ONE Income Statement For the Month Ended March 31, 2021 Product Line Industrial Household Systems Systems Total Sales Revenue $ 330,000 $ 370,000 $ 700,000 Cost of Goods Sold: Variable 33,000 47,000 80,000 Fixed 240,000 69,000 309,000 Total Cost of Goods Sold 273,000 116,000 389,000 Gross Proft 57,000 254,000 311,000 Selling and Administrative Expenses: Variable 64,000 73,000 137,000 Fixed 39,000 27,000 66,000 Total Selling and Administrative E 103,000 100,000 203,000 Operating Income (Loss) $ (46,000) $ 154,000 $ 108,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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