Members of the board of directors of Safe Zone have received the following operating
Members of the board of directors
of Safe Zone have received the following operating income data for the year
ended May 31, 2012
of the board of directors of Safe Zone have received the following operating
income data for the year ended May
For the Year Ended May 31, 2012
Cost of goods sold:
Total cost of goods sold
Marketing and administrative
Total marketing and administrative exp.
Operating income (loss)
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 $84,000 and decrease fixed marketing and administrative expenses
1.Prepare an incremental
analysis to show whether Safe Zone should drop the industrial systems product
margin income statements to show Safe Zoneâs total operating income under the
(a) with the industrial systems
(b) without the line. Compare the
differencebetween the two alternativesâ income numbers to your answer
to Requirement 1.
3.What have you learned
from the comparison in Requirement 2?
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