Members of the board of directors of Security Team have received the following operating income data for the year ended May 31, 2018: E(Click the icon to view the operating income data.) Members of the board are surprised that the industrial systems product line is not profitable. 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 $84,000 and decrease fixed selling and administrative expenses by $10,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating income Requirements 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Team'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. 3. What have you learned from the comparison in Requirement 2?
Members of the board of directors of Security Team have received the following operating income data for the year ended May 31, 2018: E(Click the icon to view the operating income data.) Members of the board are surprised that the industrial systems product line is not profitable. 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 $84,000 and decrease fixed selling and administrative expenses by $10,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating income Requirements 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. 2. Prepare contribution margin income statements to show Security Team'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. 3. What have you learned from the comparison in Requirement 2?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Security Team
Income Statement
For the Year Ended May 31, 2018
Product Line
Industrial
Household
Systems
Systems
Total
Net Sales Revenue
330,000 $
360,000 $ 690,000
Cost of Goods Sold:
Variable
36,000
42,000
78,000
Fixed
230,000
66,000
296,000
Total Cost of Goods Sold
266,000
108,000
374,000
Gross Profit
64,000
252,000
316 000
Selling and Administrative Expenses:
Variable
61,000
71,000
132,000
Fixed
43,000
25,000
68,000
Total Selling and Administrative Expenses
104,000
96,000
200,000
Operating Income (Loss)
(40,000) $
156,000 $ 116,000
Transcribed Image Text:Members of the board of directors of Security Team have received the following operating income data for the year ended May 31, 2018:
E (Click the icon to view the operating income data.)
Members of the board are surprised that the industrial systems product line is not profitable. 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 $84,000 and decrease fixed
selling and administrative expenses by $10,000.
Read the requirements.
Requirement 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. (Use parentheses or a minus
sign to enter decreases to profits.)
in operating income
- X
Requirements
1. Prepare a differential analysis to show whether Security Team should drop the industrial
systems product line.
2. Prepare contribution margin income statements to show Security Team'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.
3. What have you learned from the comparison in Requirement 2?
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