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Members of the board of directors of

Deluxe Safety

have received the following operating income data for the year justended:

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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 discontinue the line. Company accountants estimate that discontinuing the industrial systems line will decrease fixed cost of goods sold by

$82,000

and decrease fixed marketing and administrative expenses by

$9,000.

Deluxe Safety Total Analysis of Discontinuing a Product Line Totals With Totals Without Industrial Systems Industrial Systems 680,000 $ 360,000 72,000 135,000 41,000 71.000 207.000 112,000 Sales revenue Variable expenses Cost of goods sold Marketing and administrative expense Total variable expenses Contribution margin Fixed expenses: Cost of goods sold Marketing and administrative expense Total foed expenses Operating income (los) 473,000 248,000 299,000 217,000 106,000 Data table A B D 1 2 Deluxe Safety Product Line Contribution Margin Income Statement For the Year 3 4 Product lines Industrial Household Company Systems Systems Total $ 320,000 $ 360,000 $ 680,000 6 7 Sales revenue 8 Less cost of goods sold: 9 Variable 31,000 41,000 72,000 230,000 69,000 299,000 250,000 $ 309,000 59,000 $ 10 Fixed 11 Gross profit $ 12 Less marketing and administrative expenses: 13 Variable 64,000 14 Fixed 44,000 (49,000) $ 71,000 135,000 24,000 68,000 155,000 $ 106,000 $ 15 Operating income (loss) Print Done

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