Question

Question 3: Members of the board of directors of Control One have received the following operating income data for the year ended May 31, 2014 Product Line Industrial Household Systems Systems Total Sales Revenue 340.000 $ 390,000 $ 730 000 Cost of Goods Sold Variable 39,000 43.000 82,000 200 000 63.000 323.000 Fixed Total Cost of Goods Sold 299,000 106,000 405,000 Gross Profit 41,000 284,000 325,000 Selling and Administrative Expenses Variable 86.000 74,000 140,000 40.000 Fixed 28.000 68,000 Total Selling and Administrative Expenses 106 000 102.000 208 000 $ (65,000) S 182.000 $ 117.000 Operating Income (Loss) 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 $83.000 and decrease fixed selling and administrative expenses by $10.000. Requirements 1. 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 tomatives (al with the industrial systems in and it without the line Compare the difference between the two alternatives income numbers to your answer to Requirement 1 3. What have you loomed from the comparison in Requirement 22

Answer 1

Coutiburiou margu. fnuome ehteueut Parteutarc 4 uite maucvial Syeteu 780070 uinout mduetocal Roferesm 290000 Safer Reveue Vanialle apeuers - coct ogoods cold -Selling and Aduin. eapeuted (82 600 C43000 (140000) 74000) couribaitiou margin 273000 C08000 Afree aualysic couibution wargin inoue Jtateureut couttot oue cau deopped maueroial Ryereus oue counisutiou wargu e alwatt ne ituatio tn arove aualyeis coutrof 33 Aftes compoare couteibutiou uargu bott imatiou d have learuued, that ceutrol oue coer en tu fyere peodud beanug heauy fne Household due to wlicl hey mill deop Gnduetial Ryereu lbasis o both tue aualyeis, we cau kay peaduct ual earu Ou te eld btt the that ceutso oue ueuld maiuise the ptit marg to

Analyei's Stareueut uitu mduttria yeteus 730000 offeeeutial Partieuraas uinors mdutsial Syereus 39o000 Safe Reveuue Cost goods seld -Vaialle - fixed 82000 43000 323000 240000 Totae coqs 283000 10t000 325o00 Seluug and Aduin. Capeues- vaialle 140000 74 000 - fixed C8o00 Totat selting anpentes parsting Lucanef Lors 32000 117000 vie ofter asove analyris, controt oue hould uot drep the nduitsial Lycresus produut ue th they ni do te gaune, way reeut n loes inread coue by 1t00D 2019.11.25 14:48