Question

Members of the board of directors of Safety Point have received the following operating income data for the year ended May 31, 2018: (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 de fixed cost of goods sold by $80,000 and decrease fixed selling and administrative expenses by $15,000. X Read the requirements. Data Table Contribution Margin Income Statement For the Year Ended May 31, 2018 Totals Without Totals With Change if Industrial Safety Point Industrial Systems Industrial Systems Systems Is Dropped Income Statement Net Sales Revenue For the Year Ended May 31, 2018 Variable Costs: Product Line Manufacturing Industrial Household Selling and Ad ministrative Systems Systems Total Net Sales Revenue $ 300,000 $ 320,000 $ 620,000 Total Variable Costs Cost of Goods Sold: Contribution Margin 49,000 Variable 36,000 85,000 Fixed Costs: 240,000 304,000 64,000 Fixed Manufacturing 276,000 113,000 389,000 Total Cost of Goods Sold Selling and Administrative Gross Profit 24,000 207,000 231,000 Total Fixed Costs Selling and Administrative Expenses: Operating Income (Loss) 61,000 Variable 133,000 72,000 65,000 38,000 27,000 Enter any number in the edit fields and then click Check Answer Fixed 99,000 198,000 99,000 Total Selling and Administrative Expenses part remaining eck Answer $ (75,000) $ 108,000 $ 33,000 Operating Income (Loss)

Answer 1

Contribution Margin income statement
	Totals with	Totals without	Change if Industrial
	Industrial Systems	Industrial Systems	Systems is dropped
Net sales revenue	$6,20,000	$3,20,000	-$3,00,000
Variable costs:
Manufacturing	$85,000	$49,000	-$36,000
Selling and administrative	$1,33,000	$72,000	-$61,000
Total Variable costs	$2,18,000	$1,21,000	-$97,000
Contribution Margin	$4,02,000	$1,99,000	-$2,03,000
Fixed Costs:
Manufacturing	$3,04,000	$2,24,000	-$80,000
Selling and administrative	$65,000	$50,000	-$15,000
Total Fixed costs	$3,69,000	$2,74,000	-$95,000
Operating income/(Loss)	$33,000	-$75,000	-$1,08,000