SECURITY TEAM Income Statement For the Month Ended March 31, 2018 Product Line Industrial Systems Household Systems Total Net Sales Revenue $ 300,000 $ 330,000 $ 630,000 Cost of Goods Sold: Variable 35,000 42,000 7,000 210,000 63,000 273,000 Fixed Total Cost of Goods Sold 245,000 105,000 350,000 55,000 225,000 280,000 Gross Profit Selling and Administrative Expenses: 66,000 77,000 143,000 Variable 39,000 28,000 67,000 Fixed 210,000 105,000 S 120,000 Total Selling and Administrative Expenses 105,000 Operating income (Loss) S (50,000) $ 70,000
SECURITY TEAM Income Statement For the Month Ended March 31, 2018 Product Line Industrial Systems Household Systems Total Net Sales Revenue $ 300,000 $ 330,000 $ 630,000 Cost of Goods Sold: Variable 35,000 42,000 7,000 210,000 63,000 273,000 Fixed Total Cost of Goods Sold 245,000 105,000 350,000 55,000 225,000 280,000 Gross Profit Selling and Administrative Expenses: 66,000 77,000 143,000 Variable 39,000 28,000 67,000 Fixed 210,000 105,000 S 120,000 Total Selling and Administrative Expenses 105,000 Operating income (Loss) S (50,000) $ 70,000
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter5: Accounting For Retail Businesses
Section: Chapter Questions
Problem 41E: Cost of goods sold and related items The following data were extracted from the accounting records...
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Question
Making decisions about dropping a product
Members of the board of directors of Security Team have received the following operating income data for the year ended March 31, 2018:
Members of the board are surprised that the industrial systems product line is losing money. 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 $81,000 and decrease fixed selling and administrative expenses by $15,000.
Requirements
- Prepare a differential analysis to show whether Security Team should drop the industrial systems product line.
- Prepare contribution margin income statements to show Security Team’s total operating income under the two alternatives: (a) with the industrial systems line and without the line. Compare the difference between the two alternatives’ income numbers to your answer to Requirement l.
- What have you learned from this comparison in Requirement 2?
Transcribed Image Text:SECURITY TEAM
Income Statement
For the Month Ended March 31, 2018
Product Line
Industrial
Systems
Household
Systems
Total
Net Sales Revenue
$ 300,000
$ 330,000
$ 630,000
Cost of Goods Sold:
Variable
35,000
42,000
7,000
210,000
63,000
273,000
Fixed
Total Cost of Goods Sold
245,000
105,000
350,000
55,000
225,000
280,000
Gross Profit
Selling and Administrative Expenses:
66,000
77,000
143,000
Variable
39,000
28,000
67,000
Fixed
210,000
105,000
S 120,000
Total Selling and Administrative Expenses
105,000
Operating income (Loss)
S (50,000)
$ 70,000
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