Question

Members of the board are surprised that the indlustrial systens procuct line is lasing maney They commissicn a stucdy to determine whether theRead the requirrements compary should dsconinue the line Raquirement 2. Prepare contribution margin income statements to show Deluuxe Safety's total perating incme under the two alternatives (a) with the industrial systems line and h) without the line Compare the difference behween the twa alternatives' income nmbers to yaur answr to Requireet 1. What have you leaed frm this camparisur? Begin by preparing the statements with and withourt the industrial systems line, then prepare the contnbution margin income statement showing the decrease if the industrial systems ine is discontinued. (Use parenthases or a minus sign for an operating loss Deluxe Safety Total Analysis of Discontinuing a Product Line Dala Table Totals With Totals Without Industrial Systems Industrial Systems Deluxe Safety Product Line Contribution Margin Income Statement For the Year Sales revenue Variable expenses: Cost of goods sold Marketing and administrative expense Talal variable expenses Product lines Industrial Household Company Systems Systems Total Sales revenue S 300,CO 310,000 S 610,000 Ceriribution margi Fixed expenses: Less cost of goods soid: T3 000 65,000 325,000 ,000 206,000 S 212,000 Variabl 34 000 9.000 Cost of goods sold Marketing and administrative expense Total fored axpcnscs 260 000 Fixxeci Gross pro Less marketing and administrative expanses: Opcrating income (lo55) 76,000 139,000 63,000 106,000 S 10,000 Variable 63,000 39,000 24,000 Fooec Enter any number in the edit fields and then click Check Answer S (96000) $ Operating income lss)

Answer 1

ANSWER:

For Deluxe Safety

Total analysis of discontinuing a product line

	Totals with industrial system ($)	Totals without industrial system ($)
Sales revenue Variable expenses: Cost of goods sold Marketing and administrative expenses	610000 73000 139000	310000 39000 76000
Total variable expenses:	212000	115000
Contribution margin	398000	195000
Fixed expenses: Cost of goods sold Marketing and administrative expenses	325000 63000	65000 24000
Total fixed expenses	388000	89000
Operating income (loss)	10000	106000

NOTE: requirement 1 is not given to compare.